Corporate Governance in China: A Meta-Analysis

How has the impact of ‘good corporate governance’ principles on firm
performance changed over time in China? Amassing a database of 84 studies, 684 effect sizes,
and 547,622 firm observations, we explore this important question by conducting a metaanalysis
on the corporate governance literature on China. The weight of evidence
demonstrates that two major ‘good corporate governance’ principles advocating board
independence and managerial incentives are indeed associated with better firm performance.
However, we cannot find strong support for the criticisms against CEO duality. In addition,
we go beyond a static perspective (such as certain governance mechanisms are effective or
ineffective) by investigating the temporal hypotheses. We reveal that over time, with the
improvement in the quality of market institutions and development of financial markets, the
monitoring mechanisms of the board and state ownership become more strongly related to
firm performance, whereas the incentive mechanisms lose their significance. Overall, our
findings advance a dynamic institution-based view by substantiating the case that institutional
transitions matter for the relationship between governance mechanisms and firm performance
in the second largest economy in the world.