Board characteristics of medium and large Chinese companies

Abstract

Purpose

This paper aims to contribute to research studies on boards of directors in the Chinese transition economy that are by far, few and limited.

Design/methodology/approach

This paper uses basic data compilation method to investigate the board characteristics of large and medium Chinese companies listed on the Shenzhen and Shanghai Stock Exchange between 2004 and 2006. Sample data on these companies were obtained from the China Center for Economic Research (CCER) database that contains information on at least 1,350 listed companies in a particular year. Companies with missing data or incomplete information on board attributes are not included in the sample in this paper. Studies of relationships between board characteristics and firm performance in the Chinese context are compared to those studies in the West for determining whether there is a conclusive empirical outcome.

Findings

This investigation found some significant differences in board characteristics between the Chinese and Western contexts, such as non‐compliance with legal requirement, equity‐based compensation structure for board members, and lag in the establishment of Chinese board committees as compared to their counterparts in developed Western countries. In addition, the literature review reveals that studies of relationships between board characteristics and firm performance from the small community of scholars investigating the Chinese context produce inconclusive results similar to those studies of the West.

Practical implications

The empirical findings and literature review suggest that the prototype of an effective board may vary from one industry to another, or even from one company to another, and perhaps across time for the same company.

Originality/value

This contingency approach to board impact on firm performance may be relevant to companies operating in the Chinese transition economy, where factors are evolving continuously at the micro, macro, and international levels.

Citation

Liu, H. and Fong, M.W.L. (2010), "Board characteristics of medium and large Chinese companies", Corporate Governance, Vol. 10 No. 2, pp. 163-175. https://doi.org/10.1108/14720701011035684