Foreign institutional investors and corporate governance in emerging markets: Evidence of a split-share structure reform in China

Huang, Wei; Zhu, Tao

doi:10.1016/j.jcorpfin.2014.10.013

Cited by 223 publications

(156 citation statements)

References 24 publications

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“…The A‐shares were mainly available to Chinese investors, whereas B‐shares were mainly available to foreign investors. This study includes only A‐shares, as (a) B‐shares are priced in foreign currency, (b) only approximately 10% of Chinese firms issue offshore shares (i.e., B‐, H‐, and N‐shares), and (c) total market capitalization of B‐shares is less than 0.5% of the total capitalization on both the Shanghai and Shenzhen stock exchanges (Huang & Zhu, ; Jiang & Kim, ).…”

Section: Methodsmentioning

confidence: 99%

Does board gender diversity influence voluntary disclosure of intellectual capital in initial public offering prospectuses? Evidence from China

Nadeem

2019

Corporate Governance

114

113

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Research question/issue Using a multitheoretic view of boards, this study examines the impact of boardroom gender diversity (BGD) on voluntary intellectual capital (IC) disclosure in initial public offering (IPO) prospectuses in China—the world's second‐biggest economy, which is moving from a planned economy to a market‐oriented one. Furthermore, this study also investigates the impact of family ownership on the relationship between BGD and IC disclosure in the Chinese environment, which is characterized by less‐developed corporate governance mechanisms. Research findings/insights Based on a comprehensive content analysis of Chinese IPO prospectuses between 2009 and 2017 and measuring disclosure index at 78 dimensions under six broad categories of IC, the empirical results document (a) a significant positive relation between BGD and IC disclosure—in line with resource dependence theory, (b) a significant negative impact of female independent directors on IC disclosure—opposite to agency theory predictions, and that (c) the BGD–IC disclosure relationship is generally stronger for firms with two or more women on boards—in line with critical mass theory in China. Finally, this study also reveals that family ownership has adverse impacts on the BGD–IC disclosure relationship. These results are robust to a battery of sensitivity analyses. Practitioner/policy implications This study provides positive capital market implications of BGD through enhanced IC disclosure in IPO prospectuses. In doing so, the study has important implications for regulators and top management teams in devising policies concerning female representation on boards and voluntary disclosure of IC to inform the market participants of the true value of the company.

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Section: Methodsmentioning

confidence: 99%

Does board gender diversity influence voluntary disclosure of intellectual capital in initial public offering prospectuses? Evidence from China

Nadeem

2019

Corporate Governance

114

113

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“…First, compared to domestic peers, foreign institutional investors are less likely to have business dealings with local investee firms and therefore are more independent monitors of the management (Gillan and Starks 2003;Aggarwal et al 2011). Second, foreign institutional investors are less prone to local political pressure and therefore more resistant to nonshareholder value maximizing decisions by managers (Huang and Zhu 2015;Tsang et al 2016 H2 (Global Investor Hypothesis): Because of their proclivity toward activism and ability to deploy superior monitoring technologies, foreign institutional investors have a comparative advantage over their domestic peers in constraining earnings management.…”

Section: Accepted Manuscriptmentioning

confidence: 99%

Drivers behind the monitoring effectiveness of global institutional investors: Evidence from earnings management

Kim

Miller

Wan

et al. 2016

Journal of Corporate Finance

134

115

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This paper studies the drivers behind the monitoring effectiveness of institutional investors in curbing earnings management in an international setting. We identify three distinct drivers and propose two competing hypotheses: the hometown advantage hypothesis predicts that because of proximity to monitoring information, domestic institutions have a comparative advantage over foreign institutions in deterring earnings management, whereas the global investor hypothesis predicts that foreign institutions have a comparative advantage because of their proclivity toward activism and ability to deploy superior monitoring technologies. Consistent with the hometown advantage hypothesis, in aggregate, domestic, but not foreign, institutional ownership is associated with less earnings management; the monitoring effectiveness of foreign institutions improves as they gain proximity to monitoring information. Consistent with the global investor hypothesis, the monitoring effectiveness of foreign institutions improves in environments of greater agency conflicts or weaker governance controls or when the gap in monitoring technology between foreign and domestic institutions widens. JEL classification: G15; G2; G32; G34; M41

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“…In China, foreign mutual funds are found to be more effective in that regard, as local mutual funds appear to yield to political pressure (Firth et al, 2010). Huang and Zhu (2015) show that foreign institutional investors are less prone to political pressure and that they are more likely to perform arm's-length monitoring.…”

Section: The Impact Of Corporate Governance Practices On Firm Performmentioning

confidence: 99%

Corporate governance and firm performance in China

Molnár

Wang²,

Wen-hao³

2017

OECD Economics Department Working Papers

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This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ECO/WKP(2017)53 Unclassified English -Or. English ECO/WKP(2017)53 2 OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s).Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.Comments on Working Papers are welcomed, and may be sent to This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. © OECD (2017)You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for commercial use and translation rights should be submitted to rights@oecd.org ECO/WKP (2017)53 3 ABSTRACT/RÉSUMÉ Corporate governance and firm performance in ChinaA key priority in China's "new normal" period --where returns on investment are slackening --is corporate governance, which could lead to enhanced productivity by a better management of resources at the firm level. Corporate governance principles for listed firms follow global best practices, though their history is relatively short and the Chinese stock market has a number of features that make the investigation of the impact of various corporate governance practices on firm performance of particular interest. Productivity is considered as a major measure of firm performance, but for comparison accounting indicators are also used to check the impact of selected corporate governance practices using firm-level data of listed firms between 1999 and 2015. The results are broadly in line with the existing literature: once controlling for endogeneity, there is no evidence that a greater share of independent directors boosts firm performance in general. At the time when the requirement that at least one third of directors must be independent was introduced in 2002, however, profitability improved. A greater salary gap between executives and staff hurts productivity, but boosts ROA and ROE, which are often among the objectives of executives and thus encourage them to seek short-term r...

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Foreign institutional investors and corporate governance in emerging markets: Evidence of a split-share structure reform in China

Cited by 223 publications

References 24 publications

Does board gender diversity influence voluntary disclosure of intellectual capital in initial public offering prospectuses? Evidence from China

Does board gender diversity influence voluntary disclosure of intellectual capital in initial public offering prospectuses? Evidence from China

Drivers behind the monitoring effectiveness of global institutional investors: Evidence from earnings management

Corporate governance and firm performance in China

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