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The effectiveness of non‐executive directors in Chinese state‐owned enterprises

The effectiveness of non‐executive directors in Chinese state‐owned enterprises Purpose – The primary aim of this paper is to examine whether boards of directors with independent members function as effective corporate governance mechanisms in Chinese State‐Owned Enterprises (SOEs), by analysing four characteristics of non‐executive directors (NEDs) that impact on their effectiveness, namely their degree of independence, information, incentive, and competence. Design/methodology/approach – Being exploratory in nature, the research uses qualitative methods for data collection. It is based on an interpretivist perspective of social sciences, analysing and explaining the factors that influence the effectiveness of NEDs. Findings – The findings indicate that the NED system is weak in China as a result of the concentrated ownership structure, unique business culture, intervention of controlling shareholders and the lack of understanding of the benefits brought by NEDs. Research limitations/implications – The paper examines the salient features of and challenges to the system of NEDs of SOEs in present‐day China. It provides an understanding of how the various perceptions of the board, gathered from in‐depth interviews of corporate directors, leads to new interpretations of board effectiveness. The research, however, is limited owing to a relatively small sample size and the sensitive nature of the information collected. Originality/value – The study aims to fill gaps in the literature and contribute to it by assessing the “real” views and perceptions of NEDs in China in an institutional environment significantly different from that of the USA, the UK and other western economies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Management Decision Emerald Publishing

The effectiveness of non‐executive directors in Chinese state‐owned enterprises

Management Decision , Volume 48 (7): 17 – Aug 3, 2010

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Publisher
Emerald Publishing
Copyright
Copyright © 2010 Emerald Group Publishing Limited. All rights reserved.
ISSN
0025-1747
DOI
10.1108/00251741011068770
Publisher site
See Article on Publisher Site

Abstract

Purpose – The primary aim of this paper is to examine whether boards of directors with independent members function as effective corporate governance mechanisms in Chinese State‐Owned Enterprises (SOEs), by analysing four characteristics of non‐executive directors (NEDs) that impact on their effectiveness, namely their degree of independence, information, incentive, and competence. Design/methodology/approach – Being exploratory in nature, the research uses qualitative methods for data collection. It is based on an interpretivist perspective of social sciences, analysing and explaining the factors that influence the effectiveness of NEDs. Findings – The findings indicate that the NED system is weak in China as a result of the concentrated ownership structure, unique business culture, intervention of controlling shareholders and the lack of understanding of the benefits brought by NEDs. Research limitations/implications – The paper examines the salient features of and challenges to the system of NEDs of SOEs in present‐day China. It provides an understanding of how the various perceptions of the board, gathered from in‐depth interviews of corporate directors, leads to new interpretations of board effectiveness. The research, however, is limited owing to a relatively small sample size and the sensitive nature of the information collected. Originality/value – The study aims to fill gaps in the literature and contribute to it by assessing the “real” views and perceptions of NEDs in China in an institutional environment significantly different from that of the USA, the UK and other western economies.

Journal

Management DecisionEmerald Publishing

Published: Aug 3, 2010

Keywords: China; Boards of directors; Corporate governance

References