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Journal of Comparative Economics 32 (2004) 599–616
www.elsevier.com/locate/jce
Corporate governance and market valuation in China
Chong-En Bai a,b,∗, Qiao Liu a, Joe Lua, Frank M. Song a,
Junxi Zhang a
a Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China
b Tsinghua University, Beijing 100084, PR China
代写留学生英文论文Received 15 April 2003
Bai, Chong-En, Liu, Qiao, Lu, Joe, Song, Frank M., and Zhang, Junxi—Corporate governanceand market valuation in China
In this paper, we investigate empirically the relationship between governance mechanisms and the
market valuation of publicly listed firms in China. We construct measures of corporate governanceand market valuation for all publicly listed firms on the two stock markets in China from the firm’s
annual reports between 1999 and 2001. Using this three-year panel, we examine the effect ofcorporate governance variables on market valuation after controlling for factors commonly consideredin market-valuation analysis. Our empirical results support several theoretical predictions; forexample, we find that both high concentration of non-controlling shareholding and issuing sharesto foreign investors have positive effects on market valuation, while a large holding by the largest
shareholder, the CEO being the chairman or vice chairman of the board of directors, and the largestshareholder being the government have negative effects. Journal of Comparative Economics 32 (4)
(2004) 599–616. Faculty of Business and Economics, The University of Hong Kong, Hong Kong,
China; Tsinghua University, Beijing 100084, PR China.
 2004 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.
JEL classification: G34; G32
* Corresponding author. Present address: Department of Economics, School of Economics and Management,
Tsinghua University, Beijing 100084, PR China
E-mail address: baic@hku.hk (C.-E. Bai).
0147-5967/$ – see front matter  2004 Association for Comparative Economic Studies. Published by Elsevier
Inc. All rights reserved.
doi:10.1016/j.jce.2004.07.002
600 C.-E. Bai et al. / Journal of Comparative Economics 32 (2004) 599–616
Keywords: Corporate governance; Market for corporate control; Ownership; Market valuation
1. Introduction
The emerging market crisis in 1997 and 1998 rekindled worldwide interest in the issue
of corporate governance. In recent years, advocating higher governance standard has become
a regular campaign with the participation of an increasing number of parties, namely,
academics, media, regulatory authorities, corporations, institutional investors, international
organizations, and shareholder rights watchdogs.1 Numerous initiatives have been proposed
and launched by Asian countries to enhance their corporate governance practice, for
example, new listing and disclosure rules, mandatory training for board directors, and enforced
codes of governance. International organizations are also very keen on governance
issues. The International Monetary Fund has demanded that governance improvements
be included in its debt relief program. In 1998, the Organization of Economic Cooperation
and Development (OECD) issued an influential document (OECD, 1999), which is
intended to assist member and non-member countries in evaluating and improving the legal,
institutional and regulatory framework for better corporate gov