Corporate Governance Reform and International Listing: Case of the Bank of China (Hong Kong)

While much research has focused on how weak domestic institutions constrain the emergence of good corporate governance practices in transition and developing economies, few studies have paid attention to the significant inter-firm variations in governance existing there. This paper focuses on firm-specific actions that aim to distinguish the firm from its peers. It reports the disparity in credit ratings between Chinese companies listed domestically and those listed on international stock exchanges. It examines the case of Bank of China Hong Kong (BoCHK). BoCHK’s preparation for listing on Hong Kong Stock Exchange (HKSE) induced corporate restructuring and improvement in governance practices. The ability of the parent company (Bank of China) to intervene at will in the affairs of the BoCHK is countered by Hong Kong law and HKSE’s regulations, and bad governance habits are punished by the market. Although it takes time for BoCHK to fully converge to international standards of corporate governance, the listing process is a robust first step towards that destination. Please send correspondence to: 6 July to 25 August 2003: Prof. Laixiang Sun, International Institute for Applied Systems Analysis (IIASA), A-2361 Laxenburg, Austria. Tel. +43-2236-807-345, Fax. +43-2236-71313, Email: [email protected] Other periods: Prof. Laixiang Sun, Department of Financial and Management Studies, SOAS, University of London, Thornhaugh Street, Russell Square, London WC1H 0XG, UK. Tel. +44-20-78984821, Fax. +44-20-76377075, Email: [email protected] . Corporate Governance Reform and International Listing: Case of the Bank of China (Hong Kong) SOAS, University of London 2