China registered double-digit GDP growth for more than three decades. Recently, the rate has slowed down considerably. The slow growth period, which Chinese policymakers refer to as the 'new-normal', has created enormous curiosity among scholars and policymakers. In particular, scholars often tend to project if China is destined to follow Japan's fate. Insufficient reforms in the banking sector in commensuration with the real economy in Japan resulted in an unprecedented financial catastrophe. Similarly, an asymmetric development between the Chinese banking sector and the real economy is observed. This leads to an interesting question: is China destined to meet Japan's legacy? This Element attempts to answer this question. In so doing, it delves deep into the banking sector reforms of China. The Element concludes that China is not on course to meet an immediate financial chaos, but the country needs further banking reforms to avoid a potential crisis.

Corporate Governance in the Banking Sector in China

Banking Sector Reforms

The paper examines the differential impact of various firm characteristics on firm value across various threshold levels of foreign ownership.,Using a panel of 408 Indian publicly listed companies for the period during 2010–2018, a fixed-effect panel threshold regression model is adapted to study the threshold effects between foreign ownership and firm value. Tobin's Q is used as a proxy for firm value.,The study identifies three threshold levels, that is, four threshold regions in which foreign ownership changes its slope considerably. Various firm characteristics impact firm value differently in these four regions.,The study employs observations of the past nine years on variables identified as firm characteristics impacting firm value. Some variables are dropped due to the problem of multicollinearity. The employed variables may not be exhaustive in nature.,The present study implies that there exists no impact of foreign ownership on the value of the firm. Foreign investors invest for financial considerations and not with the objective of governing the firms. The governance effect of foreign investments is negligible, so their activism in the firms needs to be encouraged.,The study employs a novel approach to study the impact of foreign ownership on firm value applying fixed effect panel data threshold regression, considering foreign ownership as a proxy of corporate governance.

Corporate Governance in the Banking Sector in China

Citations

Banking Sector Reforms

Relation between foreign ownership and firm value – Fixed-effect panel threshold regression analysis

References

Relation between foreign ownership and firm value – Fixed-effect panel threshold regression analysis

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