Making Global Capital Work: Economic Openness and Corporate Governance in Chinese Capital Markets

University Of Memphis, Memphis TN

Investigators

Abstract

In this project the investigators examine how global investors in China's nascent capital markets shape firm outcomes including firm performance, technology transfer, and domestic research and development (R & D); where they fail and what the problems are; and in which institutional contexts they succeed, and why. Most financial-economic studies of global capital agree on the positive effects of opening a country's stock market to foreign investors. But political economists and sociologists emphasize countries? institutional configurations and local variation that often constrain, weaken, and even disable the benefits of economic globalization. The investigators call for a more balanced perspective on global capital by integrating these two theoretical accounts. Three datasets on China's publicly-traded firms are combined: the WindDB dataset covering these firms' financial information, and the China Center for Economics Research (CCER) and the Chinese Securities Markets and Accounting Research (CSMAR) datasets detailing organizational information. The resulting dataset provides company-by-year observations from 1994 till 2011. Acknowledging that quantitative analysis may not capture sufficient empirical details about how processes work, the investigators will conduct case-studies of 9-12 firms as supplementary data. In terms of broader impacts, this research contributes to the thriving interdisciplinary literature on the institutions of corporate governance around the world. In recent years, China has deepened its integration into the global market and developed its corporate governance regime. But the Chinese model of corporate setting where state entities are dominating and controlling shareholders is not well understood. This research will provide both theoretical and practical insights into how countries can initiate organizational and institutional changes to take advantage of the potential benefits brought by foreign investments over time. Findings should have practical implications for both corporate managers and public policy.