BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 8/2012:
A note on foreign bank entry and bank corporate governance in China
Iftekhar Hasan ()
and Ru Xie
Abstract: China employs a unique foreign bank entry model. Instead
of allowing full foreign control of domestic banks, foreign investors are
only permitted to be involved in the local banks as minority shareholders.
At the same time, foreign strategic investors are expected to commit to
bank corporate governance improvement and new technology support. In this
context, the paper examines the effect of foreign strategic investors on
Chinese bank performance. Based on a unique data set of bank ownership,
performance, corporate governance and stock returns from 2003 to 2007, our
regression and event study analysis results suggest that active involvement
of foreign strategic investors in bank management have improved the
corporate governance model of Chinese banks from a control based model to a
market oriented model, and accordingly have promoted bank performance.
Keywords: China; foreign market entry; corporate governance; (follow links to similar papers)
JEL-Codes: F23; G21; G28; G34; (follow links to similar papers)
24 pages, May 2, 2012
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