Corporate governance and firm performance: Evidence from top 500 in China
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School of Business | Master's thesis
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AbstractAbstract Corporate governance has been widely discussed around the world, especially in western countries. However how is the corporate governance situation in China? How corporate governance can be connected with firm performance? Although there are already some existing researches about this topic in China, the relationship between corporate governance and firm performance in more details like firm valuation, stock return and operating performance is still ambiguous, especially when it comes to large companies like top 500 in China. Those companies normally provoke much more controversial discussions around the world due to their special characters attributed to both Chinese economic and political related situations. Therefore, this article will only focus on the top 500 which can represent all the large companies in China to dig out how corporate governance with selected 11 governance provisions affects firm performance in firm valuation, stock return and operating performance areas respectively. This article constructed a G-Score (Governance Score) based on the 11 selected governance provisions to measure the current corporate governance situation in China. One score will be added if the governance provision which benefits the management power instead of shareholder power used by the company. The mean value of each measurement indicator for the three firm performance research areas will be obtained under each G-Score to compare if the indicator will change with the increased G-Score. After this method, a regression is also separately run for each indicator to research in more details about how both the G-Score and each individual governance provision exert impact on firm performance. The results are quite interesting since some of them are in line with current existing researches and some are different or even more surprising. The results are also compared with both available western scholars' research and local Chinese scholars' research. As to the research of this article, it shows a negative relationship between corporate governance and firm valuation and no obvious relation with stock return. Regarding to the result of operating performance, it is surprising different from most of the existing researches both from western countries and China, which shows positive correlation. This article concluded that corporation governance does not have significant relationship with operating performance for top 500 in China.
Corporate governance, firm valuation, stock return, operating performance