Did corporate governance safeguard investor interest in the global financial crisis? Evidence from Hong Kong SAR

Abstract

The global financial crisis of 2008 aroused renewed interest in the effectiveness of corporate governance mechanisms to safeguard investor interests. In this paper, we measure the effects of the crisis from 2008 to 2009 on the share performance of 976 companies listed on the Hong Kong Stock Exchange in the Hong Kong SAR and examine the link between share performance and corporate governance mechanisms. Our results present evidence that firms with a higher proportion of independent directors and a greater concentration of ownership had lower share performance, but lower price volatility, during the global financial crisis. These results suggest that no single corporate governance mechanism is fit for all economic environments and time frames. To strengthen investors' confidence, companies should enhance the efficiency and adaptability of their governance mechanisms in turbulent times.

Keywords::

• Asia-Pacific
• China
• board of directors
• corporate governance
• financial crisis
• Hong Kong SAR
• market performance
• ownership structure
• PRC

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Notes on contributors

Suwina Cheng

Professor Suwina Cheng teaches at the Department of Accountancy, Lingnan University, Hong Kong, SAR, China.

Gladie Lui

Professor Gladie Lui teaches at the Department of Accountancy, Lingnan University, Hong Kong, SAR, China.

Connie Shum

Professor Connie Shum teaches at the Department of Economics and Finance, Pittsburgh State University, USA.