Hábitos de compra

Chinese firms, like other Asian firms, share similar governance issues that arise from family ownership (Raja and Kumar, 2007), relationship-based transactions (Raja and Kumar, 2007; Claessens and Fan, 2002), group affiliation (Claessens and Fan, 2002) and poor transparency (Fan et al., 2011). Nonetheless, Chinese firms have unique corporate governance issues that stem from their unique institutional background. One difference is the cross-holdings and pyramidal schemes common in Asia (Claessens et a l, 2000) but not in China (Bai et a l, 2004; Liu, 2006).

The study of Chinese corporate governance is a burgeoning field. These studies centre mostly on listed firms. Given the significant role that the Chinese institutional setting plays in shaping corporate governance practices in China, Liu (2006, p. 417) argues that these studies may be relevant for non-listed firms due to the shared “institutional background” of both types of firms.

There is consensus that the Chinese legal infrastructure is weak and ineffective (Pistor and Xu, 2005; Liu, 2006; Chen et a l, 2006). Liu (2006, p. 444) states:

“China is a transition economy, where most components o f the institutional infrastructure are lacking or inefficiently enforced”.

The Chinese government has passed several laws in recent years to enhance the protection o f investors such as the 2006 EBL (Huang et a l, 2008; Hodgkins, 2007; Tang, 2008) and the 2007 Secured Transaction Law (Maréchal et a l, 2009). However, scholars such as La Porta et al. (1997, 1998) consider the quality o f enforcement to be just as important as the actual legal rules. Interestingly, La Porta et a l (2000) find that the quality o f enforcement, unlike the quality o f legal rules, is dependent on a country’s level o f economic development. La Porta et a l (2000) argue that both the contractual and the residual views of corporate governance rely on courts to protect and enforce contracts. This finding underlines their view that public governance has a significant bearing on firm-level corporate governance.

Liu (2006, p. 431) suggests that this maybe the case for China:

“When the legal system is incomplete and law enforcement is weak, and when business is closely connected to politics, the effectiveness o f

the conventional governance mechanisms, even though they are squarely in place, might also he greatly compromised”.

La Porta et al. (2000) suggest that when the enforcement of private contracts via the courts is cost prohibitive, other forms o f property protection such as government- enforced regulations may be more efficient. The literature indicates that this is what has happened in China with the emergence o f what Pistor and Xu (2005) refer to as an administrative governance model (see also Liu, 2006; Chen et al., 2006). Under this model, the China Securities and Regulatory Commission (CSRC) plays the role of the

“prime discipliner o f listedfirms and their management” (Chen et al., 2006, p. 425). Chen and Cheng (2007) provide empirical evidence of the comparative effectiveness of administrative governance in mitigating agency problems in Chinese listed companies. In their study, they examine the earnings of Chinese companies that issue dual shares (A and B shares), which are required to produce financial reports according to both Chinese GAAP and International Financial Reporting Standards. They find that the reduction in the earnings gap between 1999 and 2003 was due to the implementation o f a 2001 harmonization policy issued by the CSRC. Corporate governance did not have any significant effect in reducing the earnings gap.

The majority of listed companies are state-owned enterprises, in which the government still holds the controlling stake (Bai et a l, 2004; Liu, 2006). There is consensus that the Chinese government, as the controlling shareholder in many listed companies, pursues a broader set of objectives than profit maximization (Bai et a l, 2004; Clarke, 2003; Liu, 2006). These policy objectives have been listed as employment (Clarke, 2003; Liu, 2006), control over strategic industries (Clarke, 2003), politically motivated job placement (Clarke, 2003) and social stability (Liu, 2006). These broader objectives may conflict with the interests o f other shareholders (Bai et al, 2004; Clarke, 2003; Liu, 2006).

The concentrated ownership structure o f Chinese listed firms (Liu, 2006; Bai et a l, 2004) elevates the separation o f outside investors and controlling shareholders as the key agency problem in China (Bai et al, 2004; Liu, 2006). This fact is consistent with the assertion of Shleifer and Vishny (1997) that the key agency problem in most

countries does not stem from the separation o f outside investors and managers but of outside investors and controlling shareholders.

Johnson et al. (2000, p. 22) define tunneling as “the transfer o f resources out o f a company to its controlling shareholder”. There is consensus that tunneling is a serious problem in China (Bai et al., 2004; Liu, 2006). Gao and Kling (2008) draw a distinction between financial tunneling (i.e. freeze-outs and dilutions) and operational tunneling (i.e. transfer pricing and related-party transactions o f intangibles). According to Gao and Kling (2008), financial tunneling is rare in China due to its

“ineffective” delisting mechanism and because the state is usually the controlling shareholder. Several studies (Li et al., 2004; Jian and Wong, 2010; Gao and Kling, 2008) find that group-controlled Chinese listed firms compared with other Chinese listed firms conduct more related-party transactions.

Gao and Kling (2008) find that the presence o f several block-holding shareholders and shareholding by senior managers reduce tunneling. Their study shows that institutional ownership does not reduce tunneling. Gao and Kling (2008) speculate that the relationship between institutional ownership and expropriation is endogenous as investors select companies with good governance. Contradicting the findings o f Li et al. (2004), their study finds that government control does not significantly affect asset appropriation.

Interestingly, Gao and Kling (2008) find that tunneling inexplicably declined in 2001. Reporting requirements that came into effect in 2001, with respect to GAAP and the CSRC harmonization policy, may explain this decline (Chen and Cheng, 2007).