Does voluntary corporate governance matter
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| Title | Does voluntary corporate governance matter
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| Author | Liu Jianhua, Lu Rui and Wei Minghai |
| Organization | Lingnan College, Sun Yat-Sen University; School of Manaement, Sun Yat-Sen University |
| Email | liujhua8@mail.sysu.edu.cn；lurui@mail.sysu.edu.cn；wmhmns@mail.sysu.edu.cn |
| Key Words | voluntary corporate governance, investment rights settings on the board of directors, over-investment, under-investment |
| Abstract | Corporate governance is classified into voluntary style and mandatory style, both of which aim at reducing the agency conflicts of enterprises. However, the effectiveness of voluntary corporate governance is yet to be verified. China’s newly amended Company Law entitles more autonomous rights on enterprises, which indicates a possibility on the study of the issue. Based on the data about the listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2006 to 2008, this paper examines the impaction of investment rights settings in the board of directors on efficiency of investment, and the result shows voluntary corporate governance does matter to some extent. Specifically, over-investment is restricted by the reduction on the investment rights of the board of directors, especially in state holding enterprises, and under-investment is caused by the lack of investment rights. A further analysis finds that the high investment rights in state holding enterprises is for the purpose of compensating the inefficiency of monetary rewards, while in non-state holding enterprises, the investment rights settings are decided by the distribution of control rights of the enterprises. |
| Serial Number | WP499 |
| Time | 2013-08-01 |
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