An Empirical Study on Corporate Governance and Market Valuation in China |
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Authors: | Chong-En Bai Qiao Liu Joe Lu Frank M Song Junxi Zhang |
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Institution: | (1) School of Economics and Management, Tsinghua University, Beijing, 100084, PRC;(2) Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China |
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Abstract: | This paper empirically studies the relationship between the governance mechanisms and the market valuation of publicly listed
firms in China. The authors construct measures for corporate governance mechanisms and measures of market valuation for all
publicly listed firms on the two stock markets in China by using data from the firm’s annual reports. They then investigate
how the market-valuation variables are affected by the corporate governance variables while controlling for a number of factors
commonly considered in market valuation analysis. A corporate governance index is also constructed to summarize the information
contained in the corporate governance variables. The index is found to have statistically and economically significant effects
on market valuation. The analysis indicates that investors pay a significant premium for well-governed firms in China, benefiting
firms that improve their governance mechanisms.
Translated from Economic Research Journal, 2005, 2 (in Chinese) |
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Keywords: | corporate governance mechanisms market valuation corporate governance index corporate governance premium |
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