The Governance Roles of Different Types of State-Share Holders - Thesis Example

The transition experience has been diverse (see Djankov and Murrell (2002) for a review). Nellis (1999) contends that the effectiveness of privatization in transitional economies depends on the existence of the institutional underpinnings of capitalism. In addition, empirical studies confirm the close relationship between good institutions and economic development (De Long and Shleifer, 1993), Besley, 1995; Knack and Keefer, 1995; Easterly and Levine, 1997, 2003; Acemoglu, Johnson, and Robinson, 2001).

On the other hand, Stiglitz (1999) suggests that using "better management contracts" to make state-share holders act like private owners is a better choice in the absence of those institutional underpinnings, a path which has been followed by the Chinese government in the past two decades. As noted in the World Bank (1997), "most other countries in transition have turned to systemic, widespread privatization of state-owned enterprises (SOEs). In China, the state, or its agents, carry out shareholder functions performed by private owners in market economic systems.

" Retaining a large portion of state-owned shares in listed companies1, the Chinese government delegates different types of state-share holders to control these state-owned shares. This thesis attempts to examine the governance role of different types of state-share holders in Chinas listed companies.Chinas transition from a central-planned economy to a market-oriented one is special and unique. The Chinese government creates its own path of transition rather than just using a "blueprint" or "recipe" from western advisors.

The Chinese government has been always attempting to privatize its state-owned assets gradually rather than a "big bang" like that undertaken by Russia and some other former Soviet Union countries. To prevent potential social unrest from radical privatization, the Chinese government retains a large portion (more than 30%) of state-owned shares in listed SOEs. Thus, the number of privately-listed companies not owned by the Chinese government is relatively few in China.