The Impact of Corporate Governance Structures on Capital Market Performance: Evidence from China’s Listed Companies from 2003-2023

Abstract

This study examines the impact of corporate governance structures on the risk-adjusted performance of Chinese listed companies from 2003 to 2023, focusing on ownership structure, board characteristics, and executive incentives. Using robust empirical methods, the research finds that balanced ownership reduces information asymmetry, improving risk-adjusted returns. A higher proportion of independent directors enhances stock performance, while larger board sizes hinder it due to inefficiencies. Equity incentives positively influence returns, whereas salary-based incentives show a negative correlation. 

The findings underscore the importance of optimizing governance structures to enhance corporate performance, attract investments, and strengthen market stability. Recommendations include maintaining an appropriate ownership balance to promote checks and balances among shareholders, strengthening the independence and expertise of board members to improve oversight, and implementing long-term equity-based incentives to align management's goals with those of shareholders. These measures not only enhance corporate governance but also foster investor confidence and contribute to sustainable economic growth. Policymakers can leverage these insights to design governance frameworks that promote transparency, accountability, and efficiency in the capital markets.

Effective corporate governance enhances financial performance by improving efficiency and market confidence. Balanced ownership, an independent board, and appropriate executive incentives contribute to long-term value creation. Policymakers should integrate these insights into regulatory frameworks to promote transparency and accountability.