Board independence as a panacea to tunnelling? An empirical study of related party transactions in Hong Kong and Singapore

• Main Authors: CHEN, Christopher C. H., WAN, Wai Yee, ZHANG, Wei
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Corporate governance; Legal transplants; Related party transactions Tunnelling; Asian Studies; Business Law, Public Responsibility, and Ethics; Commercial Law; International Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/2815; https://ink.library.smu.edu.sg/context/sol_research/article/4773/viewcontent/SSRN_id2991423.pdf
• Institution: Singapore Management University

In this article, we examine a general question: is the legal transplantation of corporate governance rule effective in curtailing agency costs? Entering into the 21st century, we have seen reforms of corporate governance standards in the Far East since the Asian Financial Crisis in 1997, including in Hong Kong and Singapore. These reforms built on the Anglo-American model of corporate governance in the UK and US supported by broad academic literature of connecting better corporate governance with firm value and identifying the association of tunneling or wrongdoings with poor corporate governance practices. The idea is also to provide more checks-and-balances and monitoring corporate management and insiders to protect the interests of shareholders and to prevent controlling shareholders from extracting the company’s resources into their own pocket. Among various corporate governance regimes, one important tool is to improve board independence, which has seemed to become the panacea of corporate governance problems by policymakers.