Corporate governance and its reform in Hong Kong: a study in comparative corporate governance

Abstract

Purpose – The purpose of this paper was to determine to what extent Hong Kong’s experience proves (or disproves) theories from corporate governance in the areas of family ownership, concentration, self-dealing in Hong, executive compensation and other issues. This paper – written in the comparative corporate governance tradition – uses data from Hong Kong to discuss wider trends and issues in the corporate governance literature. Design/methodology/approach – The authors use the comparative corporate governance approach – exposing a range of corporate governance theories to the light of Hong Kong data. The authors purposely avoid over-theorising – leaving the data to speak for themselves for other researchers interested in such theorising. Findings – The authors find that Hong Kong presents corporate challenges that are unique among upper-income jurisdictions – in terms of potentially harmful (shareholder value diminishing) family relationships, shareholder concentration and self-dealing by insiders. The authors also show that excessive executive compensation, accounting and audit weaknesses do not pose the same kinds of problems they do in other countries. The authors provide numerous comments on theoretical papers throughout the presentation in this paper. Research limitations/implications – The authors chose a relatively unused research approach that eschews theory building – instead, the authors use data from a range of sectors to build an overall picture of corporate governance in Hong Kong. The authors subsequently affirm or critique the theories of others in this paper. Practical implications – The original analysis conducted by the authors provided 22 recommendations for revising listing rules for Hong Kong’s stock exchange. Others – particularly Asian officials – should consider Hong Kong’s experience when revising their own corporate governance listing rules and regulations. Originality/value – This paper offers new and original insights in four directions. First, the authors use the empiricist’s method – presenting data from a wide range of corporate governance areas to comment on and critique existing studies. Second, the authors provide a system-wide view of corporate governance – showing how different parts of corporate governance rules work together using concrete data. Third, the authors provide a new study in the comparative corporate governance tradition – another brick in the wall that is “normal scientific progress”. Fourth, the authors pose tentative resolutions to highly debated questions in corporate governance for the specific time and place of Hong Kong in the early 2010s.

Organizational transformation as a determinant of corporate hospitality and its effect on corporate sustainability

“…Goede (2013) in his research discussed Transnational Organized Crime (TOC) and its relation to corporate governance in the Caribbean. Michael and Goo (2015) reviewed the latest developments in corporate governance in Hong Kong, to what extent government policies reduce family control in the companies. Ntongho (2016) in his research analyzed the relationship between culture and corporate governance.…”

“…Based on this research, it can be seen that the effect of the TOC on governance in the Caribbean was very worrying. Michael and Goo (2015) reviewed the latest developments in corporate governance in Hong Kong, to what extent government policies reduced family control in the companies. The researcher used a comparative corporate governance approach which showed various corporate governance theories of companies in Hong Kong.…”

Corporate governance model in Thai state-owned enterprises: structural equation modelling approach

“…The board is responsible not only for monitoring the performance of the organisation but also for strengthening strategic policies and ensuring the integrity of management systems (Michie and Oughton, 2001; Yaacob and Basiuni, 2014; Yoshikawa et al , 2004). Consequently, a wide range of management systems have been restructured to monitor the strategic implementation and performance of organisations (Michael and Goo, 2015; Rau, 2004; Yaacob and Basiuni, 2014). These management systems include risk management (Crawford and Stein, 2004), internal controls (Giroux and McLelland, 2003), internal audits (Xie et al , 2003), strategic human resource management (Miles, 2007) and IT (Posthumusa et al , 2005).…”

Audit committee financial expertise, accrual, and real earnings management

“…Firstly, recent studies from the context note the worsening corporate governance situation in the country. For example, Michael and Goo (2015) observed the deteriorating corporate governance conditions of Hong Kong listed companies including poor level of corporate transparency and board responsibilities. A second and related reason is the loose oversight on the accounting profession in the country which may facilitate poor financial reporting practises.…”