Essay Title: 

The Relationship between Performance of H Shares after IPO and The Level of Corporate Governance

March 24, 2016 | Author: | Posted in management, mathematics and economics


So with the passage of time it can be seen that the Chinese financial market is taking leaps towards maturity in Corporate Governance and its subsequent impacts are obvious . Through this report some of the most important issues faced by newly liberated financial markets are addressed

By thorough analysis of the facts and figures stated earlier in the report one can conclude that apart from financial aspects of share performance there are other significant areas directly having an impact on the profitability of the shares . One of the important factors [banner_entry_middle]

is corporate governance that directly impacts the profitability indicators of the stocks i .e . book value ratio and price to earnings ratio . The proportion of non-executive board of directors holds positive effects for the shareholders as they can view the management efforts from a third party perspective and thus can reduce agency problems . It can be done by safeguarding the interest of the shareholders thus maximizing share profitability . Taking the assumption that H shares perform in the same manner as other stocks listed in the Asian stock markets , the first hypothesis H1 stated earlier broadly holds true

The hypothesis about separation of chairmanship and CEO is supported by the fact that most of the frauds were conducted in those companies that had imbalanced allocation of power and authority . A single person if acts as both CEO and chairman of the board of directors , has extreme powers and can indulge in frauds . Thus the separation of both these posts is very important to ensure proper financial disclosure and integrity . This and also the analysis of china ‘s listed firms from 1998 to 2002 supports the hypothesis that separation of both these posts result in better performance of the company . The third hypothesis regarding having CFO as member of board of directors is supported by the fact that it supports the basic purpose of corporate existence i .e profits . A powerful CFO can ensure transparent financial disclosures resulting in more investor confidence . But this has little tangible evidence that it result in improvement in share prices

Takao Kato (2006 , CEO Turnover , Firm Performance and Enterprise Reform in China : Evidence from New Micro Data ‘ Discussion No 1914 . Retrived on 4 Oct 2006 from www .ftp .iza .org /dp1914 .pdf… [banner_entry_footer]

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