Property rights and corporate governance in Chinese public companies, 1994--2005

This dissertation examines two sets of questions: (1) how did Chinese build a corporate governance regime from a socialist property rights system; (2) how does corporate governance work in Chinese public companies? Because of a heavy state ownership of industrial enterprises and the Constitutional superiority of state property rights to private property rights, Chinese companies face a special governance problem, that is, the relationship between state and non-state investments, in addition to the conventional shareholder-management relationship and majority-minority shareholder relationship in mainstream corporate governance research. By using both archival and contemporary legal and business data, I argue that Chinese reformers have utilized a revised theory of "separation of ownership and control" and a novel concept of "legal person property rights" to build a modern-looking company law and corporate governance structure, which allows the state to expand the association of capital from multiple state and non-state sources without immediate privatization. On the other hand, this corporate governance system fails to address adequately the relationship between majority state shareholders and minority non-state shareholders typical of the ownership structure of most Chinese public companies. Based on publicly disclosed information, state-controlled listed companies have outperformed the non-state controlled ones from 1994-2003, which runs counter to many existing findings around the world. In the meantime, however, most listed companies have reported large volume of related-party transactions as a result of concentrated stock ownership. In general, these related-party transactions are negatively associated with business performance, and non-state controlled companies tend to do worse in that regard than the state-controlled ones. The ambiguous relationship between state and non-state shareholders has been tested in the share structure reform in 2001-2005. The "property for liquidity" solution to the split-share structure problem demonstrates that private shareholders and the state have not reached a consensus on the proper role and status of government as both a shareholder and the regulator of stock markets. Separation of sovereignty and property is an on-going process in China.