International Listing as a Mechanism of Commitment to More Credible Corporate Governance Practices: the case of the Bank of China (Hong Kong)

Abstract

This paper argues that the deeply rooted cause of poor corporate governance practices in China's state-owned banks is the discretion enjoyed by policy makers to re-optimise their policy choices when they deem necessary and the consequent moral hazard leading to opportunistic behaviours of bank managers. By examining the case of Bank of China Hong Kong (BoCHK), the paper suggests that international listing can provide an effective mechanism to mitigate the consequence of discretionary policies and managerial opportunism at home because the company is now disciplined and regulated by a more developed capital market outside the home jurisdiction. It shows that BoCHK's IPO preparation and first two years of listing on Hong Kong Stock Exchange (HKSE) have induced in-depth corporate restructuring and noticeable improvement in governance practices. Copyright Blackwell Publishing Ltd 2005.

International Listing as a Means to Mobilize the Benefits of Financial Globalization: Micro-level Evidence from China

“…Yet, studies of China's internationally listed enterprises, regarded as China's leading corporations, suggest that it is not a necessary condition to reach the institutional thresholds in order to benefit from the international capital markets (Sun and Tobin, 2005). Nolan (2001) suggests that although China's large enterprises still lag their international counterparts in terms of managerial competencies, they are actively engaging in, and adapting to international product markets.…”

“…Sinopec is the largest player in the petrochemical sector and controls about 51% of China's refining capacity (Kamabara and Howe, 2007). Bank of China (BoC) is the second largest bank in China with a market share of more than 17% and BoCHK is the largest spun-off subsidiary of BoC (Sun and Tobin, 2005).…”

From Maoist self-reliance to international oil consumer: a resource-based appraisal of the challenges facing China's petrochemical sector

“…Sun & Tobin, 2005), both Sinopec and PetroChina have shown a preference for domestic directors. This is partly due to the strategic nature of the sector, but also their ability to draw on directors with past experiences.…”

The Development of the Chinese Financial System and Reform of Chinese Commercial Banks

“…Obtaining stock listing, especially cross-listing in overseas market, shows the firms' determination of voluntarily subject to higher disclosure standards and more stringent legal liability and therefore ensures the investors of their commitment to follow good corporate governance practise (Sun and Tobin, 2005;Cai, 2007 A major drawback of the CCB disclosure regime is that it only uses RMB as its reporting currency in the financial statements. Since the CCB was listed on both HKSE and SSE and its operations were extended worldwide, the use of a single currency might confuse the investors when they compare the absolute figures in certain business.…”

“…Governance for Banks', emphasising the importance of corporate governance in the bank management and finance supervision and consequently prorogued the study on the banking sector (Ding et al, 2005;Sun and Tobin, 2005;Vernikov, 2007;Ding and Hu, 2008;Lo and NG, 2009). …”