Corporate Governance and China’s H-Share Market
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Corporate Governance and China’s H-Share Market

Alice de Jonge

Using detailed case studies of the first nine mainland Chinese companies to be listed on the Hong Kong stock exchange, this book examines the evolution of corporate governance law and culture in China’s H-share market. A story emerges not of tensions between ideas of corporate governance from two different legal systems – Hong Kong vs mainland Chinese – nor about legal convergence as China adopts concepts from Anglo-American jurisdictions. Rather, it is a story of individual firms being pragmatic in mediating the different agendas of state-agencies that own or control them.
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Chapter 6: Market Efficiency in a Chinese Context

Alice de Jonge


6. Market efficiency in a Chinese context I INTRODUCTION Ever since the birth of the H-share market in 1993, as each new batch of SOEs and, later, each individual enterprise, has been approved for listing on the HKEx, policy makers have hoped that corporatization will promote the depoliticization of firm management and personnel relationships, while at the same time increasing the efficiency of asset use, boosting firm profit levels and ultimately increasing revenue from the firm to the state. The underlying premise has been that even partial privatization will improve SOEs’ performance, not so much by eliminating monopolistic government ownership per se, but rather because it removes such firms from an environment where the number of government bodies claiming ownership privileges is far too many and the actual financial stakes linking those bodies to the firm far too few. As Steinfeld explains, ‘According to this logic, once policy makers provide a clear and decisive answer to the question of who owns, enterprise performance will . . . improve.’1 The theory is that corporatization, by designating shares in the firm and then dividing up those shares amongst a contained group of holders, creates clearly-defined and identifiable owners who have a true interest in maximizing efficiency and firm profitability. The Hong Kong Stock Exchange is perceived by most as having an effective pre- and post-IPO corporate governance system with higher standards than the domestic mainland stock exchanges. According to a recent IIF Equity Advisory Group Task Force...

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