Internal Governance In China Case Study

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In China, the internal governance can be characterized as three elements: board of director, ownership and control, and managerial incentives. In China, there is a proof that outsider director on the board has a positive impact on increasing the return of investment. Having outsider director on the board leads to make a better decision. There are two kinds of board in china: director and supervisory boards. However, supervisory board is unable to monitor the daily operation in Chinese companies because it doesn’t have the power to do that. Unlike in the US, there are independent boards; majority of independent director on board, directors chairs the nomination, remuneration, and audit committees under the board.
The ownership in China mostly is government or financial institutions as reported before. As a result of that government controls most companies in China when they can use politicians’ connection to control both the market and the firm. However, in well-regulated countries politicians cannot control the firms. In China, family ownership leads to poor performance and reflects conflicts with other shareholders. On the other hand, family ownership in
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Until 1978, China only has one financial institution, the People’s Bank of China (PBOC). After changing some policies, many banks were established such as the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC), the Bank of China (BOC). Unlike other models Japan and German, banks sector in China play important role in corporate governance. Most of Chinese commercial banks owned by the government, these banks have huge number of nonperforming loans which is a result of poor loan decision and reducing the nonperforming loans for the other banks. Moreover, the Shanghai and Shenzhen stock exchanges were established to make foreign be able to trade in Chinese listed

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