Ownership and Corporate Governance: An International Review and Outlook
Ronghui Zhang
Synopsis "Ownership and Corporate Governance: An International Review and Outlook"
Ownership is usually considered as a determinant factor of efficiency. The issue of ownership has attracted much attention and been widely used for efficiency comparison, namely, under which ownership pattern enterprise operation would be more efficient. The comparison includes not only differentiating efficiency between state-owned enterprises and private those, but also measuring varied performance in private firms. But the traditional relation between ownership and firm efficiency is facing great challenges in both transition countries and Western economies. The book finds that a series of undesired problems in post-privatization period raise in fact questions about the conventional understanding of ownership's significance in enterprise efficiency. The inconsistency between ownership and performance exists also in developed economies, whose experts were engaged in helping prompt privatization programs in transition countries, and whose modern corporate governance systems were, too, based on the similar understandings of ownership. In developed countries the current corporate governance systems determined by relevant ownership are, in many cases, unable to provide ownership with effective protection; in turn, owner often lacks sufficient incentives for sound corporate governance, manifesting a functional obstruction of ownership. The book traces the way of how ownership influences its property rights structure and finally corporate governance and performance. It suggests an alternative model that there has factually existed a great ownership change, associated with enterprise system shift from small closely held enterprises to large publicly traded firms in the late 19th century. The book explores why there is often inconsistency between the actual effects of ownership and what it should create, the internal relations of problems in developed and transition countries, and why developed countries in general succeeded in achieving effectively firm efficiency, while transition economies and their predecessor-former socialist ones relatively failed. It presents that changed ownership played key roles in firm efficiency, competing interests, self-dealing behaviors, and free-ride problem, as well as the increasing significance of intangible capital and democratic circumstances under modern enterprise system. Moreover, the book proposes the meaningfulness to remedy the incompleteness of contract and to help market tap its potential by applying the new alternative. It, too, provides a distinctive angle to view solutions of enterprises in transition economies, and to analyze the applicability of choosing governance model of western countries for enterprises in transition economies.
