Is Corporate Governance in China Related to Performance Persistence?

This paper examines the relationship between performance persistence and corporate governance (proxied by board characteristics and shareholder structure). We document systematic differences in performance persistence across listed companies in China during 2001-2011, and empirically demonstrate that firms with higher corporate governance (especially for board characteristics) show higher performance persistence. The results are stronger for short horizons and for an accounting-based view. Overall, our empirical findings, although not being able to completely exclude other explanations, strongly suggest that a well-structured board with more independent directors, split positions for CEOs and the chairman as well as smaller boards favors performance persistence. In terms of the shareholder structure we find evidence that lower levels of State ownership and a nonconcentrated blockholder structure is positively associated with performance persistence