How Good Is Corporate Governance in China?

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Abstract

Based on the revised OECD Principles of Corporate Governance of 2004 and China's regulatory framework, we develop a corporate governance index (CGI) to measure overall corporate governance and disclosure practices of the 100 largest listed companies in China. The results show that Chinese companies have been making progress in corporate governance reform and there is significant difference in CGI between the top and the bottom companies' performance. Among the six parts of CGI, Chinese listed companies perform better in disclosure and transparency, but show weakness in board of supervisor and stakeholders roles. Further tests show that the improvements in corporate governance of state-owned enterprises have resulted in some initial signs of success.

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