Saturday 30 May 2015

Corporate governance in China: Podcast interview with Boya Wang

At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Boya Wang, Research Fellow at the Centre for Business Research, presented his research on corporate governance in China. In this podcast interview, he summarizes his findings on corporate governance and institutional factors of firm valuation during the financial crisis of cross provincial data of Chinese companies.

Wang said: “I have done some field work trips in China interviewing business people and that is where my business research hypothesis developed from. There is a divergence between the central and local government, their roles, and their incentives in corporate governance practices. The western media generally hold a monolithic view of the Chinese state as a unified entity, but actually it is not. Marketization and political reform have led to a divergence of interests across the local bureaucracies.

“The financial crisis provides the ideal test ground to test my hypothesis. During the financial crisis Chinese business was suffering from one of the worst economic situations and in this case the appropriation incentives will be strong. I think that this will expose many existing and neglected weaknesses in the corporate governance system.

“The political reforms and crack- down on corruption that is happening now are a reflection of what is happening in the economic sector and where we can see the rise of large non-state firms such as Alibaba and Tencent. These private businesses constitute a new constituency. For the Chinese party state, this will counter balance the conservative or entrenched interests and their power. I don’t think China will morph into the political situation that we find now in Russia.”

Listen to the full interview with Boya Wang

More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014

Saturday 16 May 2015

Changing Labour Regulations and Labour Standards in China: interview with Khalid Nadvi

At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Khalid Nadvi, Reader in International Development University of Manchester, and the research programme co-ordinator for the ESRCs Rising Powers and Inter-dependent futures programme, presented his work on labour standards in China. This podcast interview gives an overview.

Nadvi said: “Our paper has been looking at how our changing labour regulations are impacting on labour standards in China. The paper that we presented is an introduction to a special issue of the International Labour Review which is on this theme coming out in December 2014.

What we are trying to look at is how does the rise in the labour regulation that we have seen in China in recent years impact on questions around labour standards working around labour conditions and labour rights.

I think things are changing and what we are beginning to see in those changes is that increasingly there is an improvement in real wages. There has been a lot of labour activism and in fact grass roots activism with wild cat strikes and so on, and one of the consequences of that is that there has been a rise in real wages in much of the region along the coastal belt and pearl-river delta and the province of Guangdong. But the nature of the labour regime in China and the working conditions in China is varied and so if you move further inland to inner provinces you might still see very poor conditions and very harsh working environments.

We need to do more analysis of ways in which national, regional and local levels of government engage with this agenda. Looking at labour regulations and the law that has been passed is not going to be enough we need to see how they get implemented and what our evidence is pointing to is that the nature of that implementation varies at the local level. There are reasons why those variations take place.

When you look at the BRICS,  Brazil is the most interesting it is a fascinating story of the ways in which regulation around law, around finance, around labour standards, have really moved ahead. Brazil is interesting and is almost an outlier. China falls somewhere in the middle and Russia is at the other extreme, where we don’t see very strong legal institutions beginning to take effect and so therefore we see all sorts of issues around corruption.”

Listen to the full interview with Khalid Nadvi

More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014

Saturday 9 May 2015

Law and finance in Russia: interview with Rilka Dragneva-Lewers, Larry King, and Sveta Borodina

At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Rilka Dragneva-Lewers (University of Birmingham), Larry King (University of Cambridge), and Sveta Borodina (University of Cambridge) presented their work on law and finance in Russia. In this podcast interview, they summarize their findings.

Rilka Dragneva-Lewers presented on the EUs influence on Company Law Reform in the Eastern Neighbourhood: 
My main area of interest is the Ukraine, which stands out amongst the rest of the eastern European states in that it was probably the last country to reform its law on the books and it is of course in a state of very serious turmoil at the moment.

“The main approach of the EU has been to insist on legal approximation so it has pursued both integration and stimulating economic development through reform of the laws. But as we have seen this is definitely not enough and this external pressure has not been a critical factor, for legal change. Businesses manage to protect their property rights through various extra-legal ways through access to political power for example and protection.

“The difficultly with large businesses in Ukraine is that there are often run by holding companies and they are owned by oligarchs. This has meant that there has been a very strong business effort to keep transparency low and maintain the privacy of dealings. Transparency remains a critical issue in business dealings.

“At the EU level the economics is quite complex. The EU despite having had a very strong response to Russia’s policy in Ukraine with sanctions still suffers from a lot of disagreement with its member states because Russia’s approach of subsequently imposing its own sanctions against the EU has been divisive.”

Larry King, Professor of Sociology and Political Economy University of Cambridge spoke about 'The Governance Grenade, the Effect of Mass privatisation on Corporate Governance in Russia':
“There are many different ways to privatise and we looked whether how you privatise makes a big difference, for example how do you allow state owned enterprises to compete with other private firms? How do you allow domestic owners to emerge which then go on to privatise firms and which will probably have much better outcomes? This happened in Poland and much of Central and Eastern Europe, and here there is a big role for foreign investors. However, when you try to privatise everything at once, without waiting for domestic owners to emerge, or without inviting in competitive auctions involving foreigners, you have to embark on artificial privatisation.

“Rather than that being a corrupt process in itself, my argument was that it created corruption. It led to firm failure. Creating owners who had no capital, who had no expertise, who had no connections, and who couldn’t monitor firm insiders, created a perfect storm for firms to fail. Once they started to fail it created a fiscal crisis for the state as nobody was paying taxes.

“This led to a situation where firms were retreating from the market as state bureaucrats, who were already demoralised from the transition and were not being paid, were now ripe for corruption. What emerged in many of these countries, Russia or Ukraine, is a system of social property relations that were based on client type ties between political officers and captured businessmen who were what we call Oligarchs.

“Clearly these systems needed to change but Russia for example could have done what Poland did and it could have protected its domestic market and allowed competition to drive enterprise restructuring and reforms of the state but they tried to do everything at once and that led to disaster.

“In summary, you can’t really describe these countries as in transition from socialism to a market society, what you have is a new type of market society developing, one in which the relative separation of the political and the economic spheres is different. There is much less separation and to be in big business you also have to be in a political community in these countries.”

Sveta Borodina outlines her findings on law and finance in Russia:
“In Russia people tend to do business with their friends and acquaintances and there is also the concept of reputation so people know each other. They rely on law to formalise what they have agreed informally previously. Trust used to be the way of making deals but nowadays lawyers are getting involved at earlier stages and they look at the letter of the law before the signatures are put on the paper.

“People are starting to understand that if you lead your business according to the rules you are more secure you are safer and you will have more chances of keeping your business in case there is an attack from a hostile acquirer.

“I was very pleased to find that the micro side of the business is improving and that it has improved considerably and the technocrats are moving the country in the right direction but the trouble is that the political set up is in conflict with this forward movement. “

Listen to the full interview with Rilka Dragneva-Lewers, Larry King and Sveta Borodina

More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014