Is Corporate Governance in China Related to Performance Persistence?
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This paper examines the relationship between performance persistence and corporate governance (as proxied for by board characteristics and shareholder structure). We document systematic differences in performance persistence across listed companies in China during 2001–2011, and empirically demonstrate that firms with better corporate governance show higher performance persistence. The results are robust over both the short and long terms. We also find that performance persistence is an important factor in refinancing, and it can lower companies’ costs of borrowing. Overall, our findings offer important implications for business ethics, as we demonstrate how corporate governance can lower companies’ costs of debt.
KeywordsBoard structure China Corporate governance Performance persistence
The authors are grateful to an anonymous referee for their many helpful comments, and the special issue editors Douglas Cumming, Wenxuan Hou, and Edward Lee for very useful suggestions. The authors gratefully acknowledge valuable feedback from the participants at the Conference on Sustainable and Ethical Entrepreneurship, Corporate Finance and Governance, and Institutional Reform in China. Helpful comments were further provided by Martin Conyon, Joseph P.H. Fan, Kenneth Kim, and Juliane Proelss.
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