Effect of Board and Ownership Structures on Firm Performance: A Study on Chinese Listed Firms

Abstract

Research on corporate governance has been the subject of debate around the globe. Many studies have been conducted on the impact of corporate governance (CG) on firm performance. However, besides adopting CG mechanisms from the developed economies, the goal to achieve market efficiency remains crucial for the Chinese listed companies. Therefore, it is mandatory to find out the most important governance components that aid the financial stability of an organization. In this study, we examined the impact of the most important components of corporate governance such as board and ownership structures on firm performance in Chinese listed firms. Three measures of performance such as return on assets, return on equity and Tobin’s Q are incorporated for an in-depth analysis of CG structures. To achieve the objective of the study we used the latest annual data of non-financial companies from the Chinese stock market ranging from 2015 to 2023. By employing the panel regression estimation technique, we found a significant positive effect of board independence, state ownership, and institutional ownership on Chinese listed companies. Whereas the firm size has a negative effect on the firm’s performance, which implies that larger firms showed lower profitability. Notably, family ownership, board size, and board meetings have no effect on firm performance. The findings, besides significantly adding to the existing literature, have practical and managerial implications for the firms to reform their firm performance procedures. Policymakers and managers can induce informed decisions that encourage the effectiveness of corporate governance practices with improved performance.