Corporate Governance in China: A Meta-Analysis

How has the impact of 'good corporate governance' principles on firm performance changed over time in China? Amassing a database of 84 studies, 684 effect sizes, and 547,622 firm observations, we explore this important question by conducting a meta-analysis on the corporate governance literature on China. The weight of evidence demonstrates that two major 'good corporate governance' principles advocating board independence and managerial incentives arc indeed associated with better firm performance. However, we cannot find strong support for the criticisms against CEO duality. In addition, we go beyond a static perspective (such as certain governance mechanisms are effective or ineffective) by investigating the temporal hypotheses. We reveal that over time, with the improvement in the quality of market institutions and development of financial markets, the monitoring mechanisms of the board and state ownership become more strongly related to firm performance, whereas the incentive mechanisms lose their significance. Overall, our findings advance a dynamic institution-based view by substantiating the case that institutional transitions matter for the relationship between governance mechanisms and firm performance in the second largest economy in the world.