Management and Organization Review

Articles

Principal—Principal Conflict in the Governance of the Chinese Public Corporation

中国上市公司治理中的所有者冲突现象

Yiyi Sua1, Dean Xua2 and Phillip H. Phana3

a1 Peking University, China

a2 The University of Hong Kong

a3 Rensselaer Polytechnic Institute, USA

苏依依, 许德音 and 潘庆财

a1 Peking University, China

a2 The University of Hong Kong

a3 Rensselaer Polytechnic Institute, USA

Abstract

By examining the level of ownership concentration across firms, we determine how principal–principal conflict, defined as the incongruence of ownership goals among shareholder groups in a corporation, impacts agency costs of Chinese boards of directors. Based on data from Chinese companies listed on the Shanghai and Shenzhen stock exchanges during 1999-2003, we found that ownership concentration had a U-shaped relationship with board compensation, board size and the presence of independent directors. These results provide corroborating evidence that principal-principal conflict can lead to high agency costs.

Abstract

(Received October 28 2006)

(Accepted November 08 2007)

Keywords

  • agency costs;
  • board of directors;
  • China;
  • ownership concentration;
  • principal–principal conflict

关键词:

  • 代理成本;
  • 董事会;
  • 中国;
  • 股权集中度;
  • 所有者冲突

Yiyi Su (suyiyi@gsm.pku.edu.cn) is a Ph.D. candidate in Strategy at Guanghua School of Management, Peking University. Her current research interests include corporate governance and R&D strategy of Chinese firms.

Dean Xu (dxu@business.hku.hk) is Associate Professor of Strategy and International Business at the School of Business, University of Hong Kong. Previously, he was with the Guanghua School of Management, Peking University. He earned his Ph.D. in Strategy from Schulich School of Business, York University. His research focuses on Chinese firm strategy and multinational firm strategy in China. He has published in Academy of Management Review, the Asia Pacific Journal of Management, Journal of Business Research, Journal of Management, the Journal of World Business, Management International Review, and Strategic Management Journal.

Phillip H. Phan (pphan@rpi.edu) is Warren H. Bruggeman ’46 and Pauline Urban Bruggeman Distinguished Professor of Management at the Lally School of Management & Technology at Rensselaer Polytechnic Institute. He earned his Ph.D. in Strategic Management from the University of Washington. His research focuses on agency theory and the corporate governance of firms in all of their forms. He has published in Academy of Management Journal, Asia Pacific Journal of Management, European Management Journal, Journal of Business Venturing, Journal of International Business Studies, Journal of Management, Research Policy and Small Business Economics, among others. He is Associate Editor for Journal of Business Venturing, Journal of Financial Stability and Journal of Technology Transfer.