The Impacts of Corporate Governance Mechanisms and Ownership Structure on Firm Performance: A Case Study of Chinese Dual-Listed Companies


  • Wing-Kwong Chan Graduate school of business, University Sains Malaysia Corresponding Author
  • Ei-Yet Chu Graduate school of business, University Sains Malaysia Author



cross-listing, firm performance, corporate governance, ownership structure, agency theory, legal bonding, board structure


Purpose: This study examines the impactive effects of both corporate governance mechanisms and ownership structure on the firm performance of Chinese dual-listed companies which form a specific class of cross-listed companies having core business in China and list their shares in both the China A-share market and the Hong Kong market simultaneously.

Design/Methodology/Approach: Huber White’s Robust method in the LS technique is employed in this study to examine the impacts of corporate governance mechanisms and ownership structure on firm performance of Chinese dual-listed companies. To do so, we select 100 Chinese dual-listed companies consisting of 941 firm-year observations from 2003 to 2019 in our study, use both ROA and ROE to proxy the firm performance, and introduce a state control firm attribute, a binary variable representing ownership rights plus manipulation rights of China government, in the regression model to compare its effects on firm performance with that of state ownership.

Findings: In our paper, we find that the independent variable having significant associations with both ROA and ROE in the same sign significantly influences the firm performance of Chinese dual-listed companies. The regression results show that both the independent director ratio and board size worsen the firm performance in terms of both ROE and ROA, respectively, but they do not contribute to the mitigation of agency costs or the improvement of firm performance. However, we do not observe any legal bonding effects on the firm performance in this study. On the other hand, we find that contrary to the consensus of CEO duality’s negative effects on firm performance in literature, CEO duality positively influences the firm performance in terms of both ROA and ROE. Besides, foreign ownership is found to be positively related to firm performance in terms of ROA only, while state ownership is found to insignificantly and negatively influences firm performance. However, the state control firm attribute, representing the ownership rights and manipulation rights of China government, positively influences the firm performance in terms of both ROA and ROE. Thus, we conclude that the CEO duality and the state control firm attribute are the two determinant factors that positively influence Chinese dual-listed companies' firm performance. China’s domestic private ownership significantly and positively associates with ROE, while the firm size exhibits a significant and positive influence on the firm performance in terms of both ROA and ROE. In contrast, the influence of the leverage ratio on firm performance is negative and is opposite to that of firm size, the financial firm attribute negatively relates to ROA, and no significant influence on firm performance is found in stock return volatility.

Originality/Value: The research results complement the prior papers related to the fields of cross-listing and firm performance in literature. The findings in our paper are useful for investors to evaluate the firm performance of Chinese dual-listed companies, and for policymakers to enhance the listing rules and laws to ensure Chinese companies’ independent directors and other board members act diligently to improve the firm performance.


Abdallah & Bahloul. (2021). Disclosure, Shariah governance and financial performance in Islamic banks. Asian Journal of Economics and Banking, 5(3), 234–254.

Abdallah & Ioannidis. (2010). Why do firms cross-list? International evidence from the US market. Quarterly Review of Economics and Finance, 50(2), 202–213.

Al-ahdal, W. M., Alsamhi, M. H., Tabash, M. I., & Farhan, N. H. S. (2020). The impact of corporate governance on financial performance of Indian and GCC listed firms: An empirical investigation. Research in International Business and Finance, 51(September 2018), 101083.

Aloui, M., & Jarboui, A. (2018). The effects of corporate governance on the stock return volatility: During the financial crisis. International Journal of Law and Management.

Al-zaidyeen, K. A. A., & Al-rawash, S. Z. (2015). The Effect of Ownership Structure on Corporate Performance of Listed Companies in Amman Stock Exchange : An Empirical Evidence of Jordan. International Journal of Business and Social Science, 3(5), 41–49.

Amin, A., ur Rehman, R., Ali, R., & Mohd Said, R. (2022). Corporate Governance and Capital Structure: Moderating Effect of Gender Diversity. SAGE Open, 12(1).

Ayyagari, M., & Doidge, C. (2010). Does cross-listing facilitate changes in corporate ownership and control? Journal of Banking and Finance, 34(1), 208–223.

Bhabra, H. S., Liu, T., & Tirtiroglu, D. (2008). Capital structure choice in a nascent market: Evidence from listed firms in China. Financial Management, 37(2), 341–364.

Boateng, A., Cai, H., Borgia, D., Bi, X. G., & Ngwu, F. N. (2017). The influence of internal corporate governance mechanisms on capital structure decisions of Chinese listed firms. Review of Accounting and Finance, 16(4), 444–461.

Borges Júnior, D. M. (2022). Corporate governance and capital structure in Latin America: empirical evidence. Journal of Capital Markets Studies, 6(2), 148–165.

Busaba, W. Y., Guo, L., Sun, Z., & Yu, T. (2015). The dark side of cross-listing: A new perspective from China. Journal of Banking and Finance, 57, 1–16.

Chakraborty, A., Gao, L., & Sheikh, S. (2019). Corporate governance and risk in cross-listed and Canadian only companies. Management Decision, 57(10), 2740–2757.

Chang, E. C., & Wong, S. M. L. (2004). Political control and performance in China’s listed firms. Journal of Comparative Economics, 32(4), 617–636.

Che, L. (2018). Investor types and stock return volatility. Journal of Empirical Finance, 47(September 2016), 139–161.

Chiang, Y. C. M.-H. (2017). Foreign Ownership and Firm-level Stock Return Volatility in Taiwan. Investment Management and Financial Innovations, 14(3).

Claessens & Fan (2002). Corporate governance in Asia. International Review of Finance, 3:2, 71–103.

Coffee Jr., J. C. (2002). Racing Towards the Top ?: The Impact of Cross- Listing and Stock Market Competition on International Corporate Governance. Colum. L. Rev., 1757.

Daraghma, Z. M. A. (2016). The impact of foreign ownership on the stock returns and accounting performance of the listed corporations in the Palestine exchange. Information (Japan), 19(1), 121–137.

Darsono, S. N. A. C., Wong, W. K., Nguyen, T. T. H., Jati, H. F., & Dewanti, D. S. (2022). Good Governance and Sustainable Investment: The Effects of Governance Indicators on Stock Market Returns. Advances in Decision Sciences, 26(1), 69-101.

Dodd, O. (2013). Why do firms cross-list their shares on foreign exchanges? A review of cross-listing theories and empirical evidence. Review of Behavioral Finance, 5(1), 77–99.

ElKelish, W. W. (2018). Corporate governance risk and the agency problem. Corporate Governance (Bingley), 18(2), 254–269.

Estwick, S. A. (2016). The impact of principal-principal conflict on financial flexibility: A Case of Caribbean Firms. Qualitative Research in Financial Markets, 8(4), 305–330.

Fariha, R., Hossain, M. M., & Ghosh, R. (2022). Board characteristics, audit committee attributes and firm performance: empirical evidence from emerging economy. Asian Journal of Accounting Research, 7(1), 84–96.

Ferris, S. P., Kim, K. A., & Noronha, G. (2009). The effect of crosslisting on corporate governance: A review of the international evidence. Corporate Governance: An International Review, 17(3), 338–352.

Florackis, C., & Ozkan, A. (2009). Managerial incentives and corporate leverage: Evidence from the United Kingdom. Accounting and Finance, 49(3), 531–553.

Garanina, T., & Kaikova, E. (2016). Corporate governance mechanisms and agency costs: cross-country analysis. Corporate Governance (Bingley), 16(2), 347–360.

Ghadhab, I., & M’rad, M. (2018). Does US cross-listing come with incremental benefit for already UK cross-listed firms. Quarterly Review of Economics and Finance, 69, 188–204.

Ghosh, C., Giambona, E., Harding, J. P., & Sirmans, C. F. (2011). How Entrenchment, Incentives and Governance Influence REIT Capital Structure. Journal of Real Estate Finance and Economics, 43(1), 39–72.

Gul, S., Sajid, M., Razzaq, N., & Afzal, F. (2012). Agency cost, corporate governance and ownership structure (the case of Pakistan). International Journal of Business and Social Sciences, 3(9), 268–277.

Hatane, S. E., Supangat, S., Tarigan, J., & Jie, F. (2019). Does internal corporate governance mechanism control firm risk? Evidence from Indonesia’s three high-risk sectors. Corporate Governance (Bingley), 19(6), 1362–1376.

Hegde, S., Seth, R., & Vishwanatha, S. R. (2020). Ownership concentration and stock returns: Evidence from family firms in India. Pacific-Basin Finance Journal, August 2017, 101330.

Huang, Y. S., & Wang, C. J. (2015). Corporate governance and risk-taking of Chinese firms: The role of board size. International Review of Economics and Finance, 37, 96–113.

Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305–360.

Jian, Z., Tingting, Z., & Shengchao, C. (2011). Cross listing, corporate governance and corporate performance: Empirical evidence of Hong Kong-listed Chinese companies. Nankai Business Review International, 2(3), 275–288.

Kalsie, A., & Shrivastav, S. M. (2016). Analysis of board size and firm performance: Evidence from NSE companies using panel data approach. Indian Journal of Corporate Governance, 9(2), 148–172.

Kamarudin, K. A., Ariff, A. M., & Jaafar, A. (2020). Investor protection, cross-listing and accounting quality. Journal of Contemporary Accounting and Economics, 16(1), 100179.

Karolyi, G. A. (2006). The world of cross-listings and cross-listings of the world: Challenging conventional wisdom. In Review of Finance.

Li, H. (2019). Direct overseas listing versus cross-listing: A multivalued treatment effects analysis of Chinese listed firms. International Review of Financial Analysis, 66(September), 101391.

Liljeblom, E., Maury, B., & Hörhammer, A. (2020). Complex state ownership, competition, and firm performance – Russian evidence. International Journal of Emerging Markets, 15(2), 189–221.

Lin, K. J., Lu, X., Zhang, J., & Zheng, Y. (2020). State-owned enterprises in China: A review of 40 years of research and practice. China Journal of Accounting Research, 13(1), 31–55.

Lins, K. v. (2003). Equity Ownership and Firm Value in Emerging Markets. The Journal of Financial and Quantitative Analysis, 38, 159–184.

Liu, L. X., Jiang, F., & Sathye, M. (2017). Does bonding really bond? Liability of foreignness and cross-listing of Chinese firms on international stock exchanges. Research in International Business and Finance, 41(April), 109–124.

Lok, C. L., Chuah, S. F., & Hooy, C. W. (2022). The Impacts of Data-Driven Leadership in IR4. 0 adoption on firm performance in Malaysia. Annals of Financial Economics, 17(03), 2250023.

Ma, J., & He, X. (2018). The Chinese Communist Party’s integration policy towards private business and its effectiveness: An analysis of the Ninth National Survey of Chinese Private Enterprises. Chinese Journal of Sociology, 4(3), 422–449.

Mahmood, F., Shahzad, U., Nazakat, A., Ahmed, Z., Rjoub, H., & Wong, W. K. (2022). The nexus between cash conversion cycle, working capital finance and firm performance: Evidence from novel machine learning approaches. Annals of Financial Economics, 2250014.

Mathew, S., Ibrahim, S., & Archbold, S. (2016). Boards attributes that increase firm risk – evidence from the UK. Corporate Governance (Bingley), 16(2), 233–258.

Michael C. Jensen. (1986). Agency Costs of Free Cash Flow , Corporate Finance , and Takeovers Agency Costs of Free Cash Flow , Corporate Finance , and Takeovers. American Economic Review, 76(2), 323–329.

Moyer, R. C., Rao, R., & Baliga, B. R. (1996). CEO Duality , Firm Performance and Corporate Governance : What’s the Fuss? Strategic Management Journal, 17(1), 41–53.

Naufa, M. A., Lantara, I. W. N., & Lau, W. Y. (2019). The impact of foreign ownership on return volatility, volume, and stock risks: Evidence from ASEAN countries. Economic Analysis and Policy, 64, 221–235.

Nguyen, T. T. H., Moslepour, M., Van Vo, T. T., & Wong, W. K. (2020). State ownership, profitability, risk-taking behavior, and investment: An empirical approach to get better trading strategy for listed corporates in Vietnam. Economies, 8, 46.

Nguyen, T. T. H., & Wong, W. K. (2021). Do state ownership and business environment explain corporate cash holdings? Empirical evidence from an emerging country. Asian Academy of Management Journal of Accounting & Finance, 17(1).

Nguyen, T. T. H., Wong, W. K., Phan, G. Q., Tran, D. T. M., & Moslehpour, M. (2021). Corporate valuation spurred by information transparency in an emerging economy. Annals of Financial Economics, 16(03), 2150011.

Pham, D. H., & Pham, Q. V. (2020). The impact of ceo duality on firm performance: examining the life-cycle theory in vietnam. Accounting, 6(5), 737–742.

Queiri, A., Madbouly, A., Reyad, S., & Dwaikat, N. (2021). Corporate governance, ownership structure and firms’ financial performance: insights from Muscat securities market (MSM30). Journal of Financial Reporting and Accounting, 19(4), 640–665.

Rathnayake, D. N., Kassi, D. F., Louembe, P. A., Sun, G., & Ning, D. (2019). Does Corporate Ownership matter for Firm Performance? Evidence from Chinese Stock Exchanges. International Journal of Economics and Financial Issues, 9(1), 96–107.

Sabbaghi, O. (2016). Corporate governance in China: a review. Corporate Governance (Bingley), 16(5), 866–882.

Sayari, N., & Marcum, B. (2018). Reducing risk in the emerging markets: Does enhancing corporate governance work? BRQ Business Research Quarterly, 21(2), 124–139.

Sethi, P., Sahu, T. N., & Maity, S. (2022). Firm performance, vertical agency crisis and corporate governance of Indian listed companies. Asian Journal of Economics and Banking.

Shahid, M. N., Abbas, A., Latif, K., Attique, A., & Khalid, S. (2020). The mediating role of board size, philanthropy and working capital management between basic corporate governance factors and firm’s performance. Journal of Asian Business and Economic Studies, 27(2), 135–151.

Stulz, R. M. (1999). Globalization, Corporate Finance, and the Cost of Capital. Journal of Applied Corporate Finance, 12.

Suu, N. D., Tien, H. T., & Wong, W. K. (2021). The impact of capital structure and ownership on the performance of state enterprises after equitization: Evidence from Vietnam. Annals of Financial Economics, 16(02), 2150007.

Thakolwiroj, C., & Sithipolvanichgul, J. (2021). Board Characteristics and Capital Structure: Evidence from Thai Listed Companies. Journal of Asian Finance, Economics and Business, 8(2), 861–872.

Velte, P. (2017). Does ESG performance have an impact on financial performance? Evidence from Germany. Journal of Global Responsibility, 8(2), 169–178.

Vo, X. V. (2015). Foreign ownership and stock return volatility - Evidence from Vietnam. Journal of Multinational Financial Management, 30, 101–109.

Vu, M. C., Phan, T. T., & Le, N. T. (2018). Relationship between board ownership structure and firm financial performance in transitional economy: The case of Vietnam. Research in International Business and Finance, 45(January 2017), 512–528.

Vuong, G. T. H., Nguyen, M. H., & Wong, W.K. (2022). CBOE volatility index (VIX) and corporate market leverage. Cogent Economics & Finance, 10(1), 2111798.

Wang, Q. (Sophie), Anderson, H. D., & Chi, J. (2017). The impact of VC backing on the corporate governance of Chinese IPOs. Pacific Accounting Review, 29(3), 330–355.

Wen, Y., Rwegasira, K., & Bilderbeek, J. (2002). Corporate governance and capital structure decisions of the Chinese listed firms. Corporate Governance, 10(2), 75–83.

Xie, F., Anderson, H. D., Chi, J., & Liao, J. (2019). Does residual state ownership increase stock return volatility? Evidence from china’s secondary privatization. Journal of Banking and Finance, 100, 234–251.

You, L., Payne, J. D., & Lin, S. W. J. (2018). Do multiple foreign listings create value for firms? Quarterly Review of Economics and Finance, 69, 134–143.

Yu, M. (2013). State ownership and firm performance: Empirical evidence from Chinese listed companies. China Journal of Accounting Research, 6(2), 75–87.

Zhang, C., Cheong, K. C., & Rasiah, R. (2018). Board independence, state ownership and stock return volatility during Chinese state enterprise reform. Corporate Governance (Bingley), 18(2), 220–232.



How to Cite

Chan, W.-K., & Chu, E.-Y. (2023). The Impacts of Corporate Governance Mechanisms and Ownership Structure on Firm Performance: A Case Study of Chinese Dual-Listed Companies. Advances in Decision Sciences, 26(4), 98-126.