Background

The Asian Financial Crisis at the turn of the 20th century has exposed the weakness in corporate governance across many publicly listed companies in East Asia. Many governments and international organizations such as the World Bank and the International Monetary Fund have made efforts to reform corporate governance. Years have passed. The effects of these reforms remain controversial. Debates on what cause the corporate governance practices and what sorts of governance structures are best suited for Asian corporations continue.

Although China was sheltered from the Crisis, its companies have been even more severely plagued by weak corporate governance problems. The focal point of China’s economic reform has been the privatization of state-owned enterprises through public listing in its two young stock markets. However, many of these publicly listed companies suffer from the entrenchment problems of the management and bureaucrats. Not only does the weak governance system in the country impair companies’ ability to raise new funds, it also creates barriers for companies to trade and build networks with overseas business partners. With the accession to World Trade Organization, improving the governance and the credibility of its state-owned and private enterprises is an urgent issue to be resolved before they are qualified for competition in world markets.

Debates of the corporate governance problems continue in Asia and China. We view that one important reason why these issues remain unresolved is that we lack objective guidance supported by credible research and independent research agencies, and that the few existing credible research is out of reach to business communities and policy-making bodies. Removing barriers against producing high quality independent research in corporate governance and enhancing communication between researchers and the public thus motivate the setting up of the Center for Institutions and Governance at the Chinese University of Hong Kong.