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Board independence, state ownership and stock return volatility during Chinese state enterprise reform

Purpose: This study aimed at investigating the influence of corporate governance on firm risk during the Chinese state enterprise reform. The purposes of this study are to examine the effects of board independence, state ownership and other governance variables on firm risk and to check the influenc...

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Main Authors: Zhang, Cheng, Cheong, Kee Cheok, Rasiah, Rajah
Format: Article
Published: Emerald 2018
Subjects:
HD Industries. Land use. Labor
HF Commerce
HG Finance
Online Access:http://eprints.um.edu.my/20171/
https://doi.org/10.1108/CG-08-2016-0172
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spelling my.um.eprints.201712019-01-28T01:31:09Z http://eprints.um.edu.my/20171/ Board independence, state ownership and stock return volatility during Chinese state enterprise reform Zhang, Cheng Cheong, Kee Cheok Rasiah, Rajah HD Industries. Land use. Labor HF Commerce HG Finance Purpose: This study aimed at investigating the influence of corporate governance on firm risk during the Chinese state enterprise reform. The purposes of this study are to examine the effects of board independence, state ownership and other governance variables on firm risk and to check the influence of controlling shareholder types on firm risk. Design/methodology/approach: This study uses the dynamic and static panel model to estimate the effects of board independence, state ownership and other governance factors on return volatility. To examine the influence of controlling shareholder types on corporate risk-taking, this study further used the treatment effect model (or sample selection model) to analyze the effect of private, state-owned enterprise (SOE) entity, central government and local government controls on corporate risk-taking. Findings: It was found that the enforcement of board independence significantly increases firm risk. The strategy of decentralizing state enterprises (from central government to local government) is a good way to achieve stable stock returns. Originality value: This study contributes to existing knowledge in several ways. First, it focused on independent directors rather than on the size of the corporate board. Second, it highlighted the impacts of state ownership and control on corporate risk. Instead of treating all types of state ownership as homogenous, SOEs are further classified into directly controlled and indirectly controlled, in line with prior studies. Emerald 2018 Article PeerReviewed Zhang, Cheng and Cheong, Kee Cheok and Rasiah, Rajah (2018) Board independence, state ownership and stock return volatility during Chinese state enterprise reform. Corporate Governance: The International Journal of Business in Society, 18 (2). pp. 220-232. ISSN 1472-0701 https://doi.org/10.1108/CG-08-2016-0172 doi:10.1108/CG-08-2016-0172
institution Universiti Malaya
building UM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaya
content_source UM Research Repository
url_provider http://eprints.um.edu.my/
topic HD Industries. Land use. Labor
HF Commerce
HG Finance
spellingShingle HD Industries. Land use. Labor
HF Commerce
HG Finance
Zhang, Cheng
Cheong, Kee Cheok
Rasiah, Rajah
Board independence, state ownership and stock return volatility during Chinese state enterprise reform
description Purpose: This study aimed at investigating the influence of corporate governance on firm risk during the Chinese state enterprise reform. The purposes of this study are to examine the effects of board independence, state ownership and other governance variables on firm risk and to check the influence of controlling shareholder types on firm risk. Design/methodology/approach: This study uses the dynamic and static panel model to estimate the effects of board independence, state ownership and other governance factors on return volatility. To examine the influence of controlling shareholder types on corporate risk-taking, this study further used the treatment effect model (or sample selection model) to analyze the effect of private, state-owned enterprise (SOE) entity, central government and local government controls on corporate risk-taking. Findings: It was found that the enforcement of board independence significantly increases firm risk. The strategy of decentralizing state enterprises (from central government to local government) is a good way to achieve stable stock returns. Originality value: This study contributes to existing knowledge in several ways. First, it focused on independent directors rather than on the size of the corporate board. Second, it highlighted the impacts of state ownership and control on corporate risk. Instead of treating all types of state ownership as homogenous, SOEs are further classified into directly controlled and indirectly controlled, in line with prior studies.
format Article
author Zhang, Cheng
Cheong, Kee Cheok
Rasiah, Rajah
author_facet Zhang, Cheng
Cheong, Kee Cheok
Rasiah, Rajah
author_sort Zhang, Cheng
title Board independence, state ownership and stock return volatility during Chinese state enterprise reform
title_short Board independence, state ownership and stock return volatility during Chinese state enterprise reform
title_full Board independence, state ownership and stock return volatility during Chinese state enterprise reform
title_fullStr Board independence, state ownership and stock return volatility during Chinese state enterprise reform
title_full_unstemmed Board independence, state ownership and stock return volatility during Chinese state enterprise reform
title_sort board independence, state ownership and stock return volatility during chinese state enterprise reform
publisher Emerald
publishDate 2018
url http://eprints.um.edu.my/20171/
https://doi.org/10.1108/CG-08-2016-0172
_version_ 1643691200322994176
score 13.211869

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