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International Listing as a Mechanism of Commitment to More Credible Corporate Governance Practices: the case of the Bank of China (Hong Kong)
Author(s) -
Sun Laixiang,
Tobin Damian
Publication year - 2005
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.2005.00405.x
Subject(s) - corporate governance , china , moral hazard , business , stock exchange , listing (finance) , opportunism , accounting , restructuring , shareholder , discretion , initial public offering , jurisdiction , formality , finance , economics , market economy , incentive , political science , law
This paper argues that the deeply rooted cause of poor corporate governance practices in China's state‐owned banks is the discretion enjoyed by policy makers to re‐optimise their policy choices when they deem necessary and the consequent moral hazard leading to opportunistic behaviours of bank managers. By examining the case of Bank of China Hong Kong (BoCHK), the paper suggests that international listing can provide an effective mechanism to mitigate the consequence of discretionary policies and managerial opportunism at home because the company is now disciplined and regulated by a more developed capital market outside the home jurisdiction. It shows that BoCHK's IPO preparation and first two years of listing on Hong Kong Stock Exchange (HKSE) have induced in‐depth corporate restructuring and noticeable improvement in governance practices.