The corporate governance structure and corporate performance: empirical studies of China's listed real estate companies

摘要

This study examines the effectiveness of the corporate governance mechanisms and their impact on corporate performance, using the data of one industry sector-China's listed real estate companies. The studies include four parts: (l). the ownership structure, (2). the board structure; (3). the manager compensation and (4). the agency costs measured by asset utilization efficiency and manager discretionary expenses. The empirical studies cover three years (2000 to 2002). Here I classify the listed real estate companies into the subgroups of state owned enterprises (SOEs), privately owned companies (POEs), SOEs dominated by state shares and state legal person shares for analysis. The conclusions are first, in the real estate industry of China where the market is not fully open and transparent; the land resource is controlled by the government and is transferred by the negotiation or agreement between related parties, rather than the open market price and the government has strong influence on the performance of the listed real estate companies. Although the ownership structure is diversified in the real estate industries and the POEs take part in the property market development with the SOEs, the ownership concentration is positively associated with the firm performance. The companies with highly concentrated ownership structure are state owned companies (SOEs), especially the state shares dominated SOEs. ududThe state shares are positively associated with firm performance, indicating the government influence on the real estate industry. This study does not support the suggestion that SOEs are more inefficient and legal person shares outperform the state shares. The study also shows that under the concentrated ownership structure, the dilution of the controlling power among more than one controlling shareholder would reduce the agency cost and improve the firm performance. ududThe second conclusion is that the board size is positively associated with firm performance, but the relationship is non-linear. The board with an appropriate portion of independent directors may improve the effectiveness of corporate governance. Board size is decided by the ownership structure and the adjustment of the ownership structure, e.g. increasing the number of shares owned by other large shareholders will change the board size and improve the monitoring function of the board. ududThe third conclusion is that the agency costs rooted in the separation of ownership and management are related with ownership structure. The largest shareholder is significant in improving the assets utilization efficiency but not significant in reducing manager discretionary expense. The presence of the other blockholders would reduce the agency costs. The agency costs POEs are higher than that in SOEs, indicating that the owner/manager in POEs who owns less than 100% of the company stake is likely to extract benefits from the abuse of the controlling right.ududThe fourth conclusion is that the manager's compensation of the China's listed real estate companies includes three elements, i.e. a basic salary, a position allowance and a bonus; they are all paid in cash. The managers own tiny or no equity stake of the company. Stock option is not adopted in China's listed real estate companies. Manager's compensation is not associated with the firm's performance, but is associated with firm size and the turnovers of chairmen and top managers.ududThe study also discusses the two fundamental issues that the corporate governance reform of China's listed companies are facing. One is the ambiguity of property rights in SOEs and another one is the inefficient managerial incentive system and the two factors are interlinked. The ambiguous property rights in SOEs have resulted in the companies being controlled by insiders in reality. The highly concentrated ownership structure has led to the board of directors being dominated by insiders-directors from the controlling shareholder and executive directors and the illiquidity of majority of shares on stock market makes the market as external governance factor ineffective. I also discuss the factors deterring the wide adoption of managerial stock option on the Chinese stock market.