Relational dimensions of corporate governance in translation: networked governance in China and India

The effectiveness of corporate governance mechanisms has been a subject of academic research for many decades. Although the large majority of corporate governance studies prior to mid 1990s were based on data from developed market economies such as the U.S., U.K. and Japan, in recent years researchers have begun examining corporate governance in transition economies. A comparison of China and India offers a unique environment for analyzing the effectiveness of corporate governance. First, both countries state-owned enterprise (SOE) reform strategies hinges on the Modern Enterprise System characterized by the separation of ownership and control. Ownership of an SOE’s assets is distributed among the government, institutional investors, managers, employees, and private investors. Effective control rights are assigned to management, which generally has a very small, or even nonexistent ownership stake. This distinctive shareholding structure creates conflict of interest not only between management (insiders) and outside investors but also between large shareholders and minority investors. Moreover, because both governments desire to retain some control—in part through partial retained ownership of commercialized SOEs, further conflicts arise between politicians and firms. Second, directors in publicly listed firms in both countries are predominantly drawn from institutions with significant non-market objectives: the government and other state enterprises, particularly in China, and extended families, particularly in India. As a result, the effectiveness of internal governance mechanisms, such as the number of independent directors on the board and the number of independent supervisors on the supervisory committee, are likely to be quiet limited, although this has yet to be fully evaluated. Third, because of the political nature of the privatization process itself, typical external governance mechanisms, such as debt (in conjunction with appropriate bankruptcy procedures), takeover threats, legal protection of investors, product market competition, etc., have not been effective. Bank loans have traditionally been viewed as grants from the state designed to bail out failing firms. State-owned banks retain monopoly or quasi-monopoly positions in the banking sector and profit is not their overriding objective. If political favor is deemed appropriate, subsidized loans, rescheduling of overdue debt or even outright transfer of funds can be arranged with SOEs (soft budget constraints). In addition, a market for private, non-bank debt is limited in India and has yet to be established China. There is no active merger or takeover activity in Chinese stock markets to discipline management. Information available in the capital markets is insufficient to keep at arm’s length of the corporate decisions. In light of the above peculiarities, China and India share many of the typical institutional characteristics as a transition economy, including poor legal protection of creditors and investors, the absence of an effective takeover market, an underdeveloped capital market, a relative inefficient banking system and significant interference of politicians in firm management. Su (2005) finds that the extent of political interference, managerial entrenchment and institutional control can help explain corporate dividend policies and post-IPO financing choices in this situation. Allen et al. (2005) demonstrate that standard corporate governance mechanisms are weak and ineffective for publicly listed firms while alternative governance mechanisms based on reputation and relationship have been remarkably effective in the private sector. Because the peculiarities are significant in this context, the differences in the political-economies of the two countries are likely to be evident in such relational terms. In this paper we explore the peculiarities of corporate governance in this transitional environment through a systematic examination of certain aspects of these reputational and relationship dimensions. Utilising the methods of social network analysis we identify the inter-organisational relationships at board level formed by equity holdings and by shared directors. Using data drawn from the Orbis database we map these relations among the 3700 largest firms in India and China respectively and identify the roles played in these relational networks by the particularly characteristic institutions in each case. We find greatly different social network structures in each case with some support in these relational dimensions for their distinctive features of governance. Further, the social network metrics allow us to considerably refine proxies for political interference, managerial entrenchment and institutional control used in earlier econometric analysis.

Public transport

Public transport plays an essential role in enabling people from low income and other disadvantaged groups to access employment and services. It also contributes to the development of social networks and social capital, by helping people to visit friends and relatives and take part in community and other social activities. Public policy makers have begun to recognise that adequate public transport provision can play an important role in reducing social exclusion. [Taken from introductory paragraph.]

The illusions of competition in the water sector: a response to the OFWAT/Cave consultations on introducing competition in the water sector in England and Wales

The paper provides a critical review of the role of liberalisation and competition in the water sector, based on empirical evidence from the UK and internationally. The paper is submitted as evidence to the official reviews of competition in water sector in England and Wales.

Health Interreg Sante, un projet qui fait bouger...

Newsletter outlining the project objectives and updates.

Modelling dosator filling and discharge of powder

Dosators and other dosing mechanisms operating on generally similar principles are very widely used in the pharmaceutical industry for capsule filling, and for dosing products that are delivered to the customer in powder form such as inhalers. This is a trend that is set to increase. However a significant problem for this technology is being able to predict how accurately and reliably, new drug formulations will be dosed from these machines prior to manufacture. This paper presents a review of the literature relating to powder dosators which considers mathematical models for predicting dosator performance, the effects of the dosator geometry and machine settings on the accuracy of the dose weight. An overview of a model based on classical powder mechanics theory that has been developed at The University of Greenwich is presented. The model uses inputs from a range of powder characterisation tests including, wall friction, bulk density, stress ratio and permeability. To validate the model it is anticipated that it will be trialled for a range of powders alongside a single shot dosator test rig.

Review of models for predicting the discharge rates of bulk particulates from silos and bins

Various models for predicting discharge rates have been developed over the last four decades by many research workers (notably Beverloo [1], Johanson [2], Brown [3], Carleton [4], Crewdson [5], Nedderman [6], Gu [7].). In many cases these models offer comparable approaches to the prediction of discharge rates of bulk particulates from storage equipment when solely gravity is acting to initiate flow (since they invariably consider the use of mass-flow design equipment). The models that have been developed consider a wide range of bulk particulates (coarse, incompressible, fine, cohesive) and most contemporary works have incorporated validation against test programmes. Research currently underway at The Wolfson Centre for Bulk Solids Handling Technology, University of Greenwich, has considered the relative performance of these models with respect to a range of bulk properties and with particular focus upon the flexibility of the models to cater for different geometrical factors for vessels.

Comparisons between “sand blast” and “centripetal effect accelerator” type erosion testers

There are two major types of erosion testing devices that are used throughout the world for quantifying particle impact erosion against a solid surface. The first of these uses pressurised air to accelerate abrasive particles through a nozzle so that they impinge upon a target specimen. The second adopts a rotating disc to accelerate abrasive particles using the centripetal effect so that they impinge upon a series of targets arranged around the periphery of the disc. This paper reports the findings of a collaborative project that was designed to compare the performance and results obtained from a rig of each of the two types mentioned above. The sand blast type rig was provided by The Department of Powder Science Technology (POSTEC) at The Telemark Technological Research and Development Centre (TEL-TEK), Porsgrunn, Norway while the centripetal effect accelerator was provided by The Wolfson Centre for Bulk Solids Handling Technology, University of Greenwich, London, UK. The test programme included tests against a wide range of materials that are commonly used in pneumatic handling facilities. (Pneumatic handling is a means of conveying and transporting powders and granular solid materials in bulk in industrial process plant, through pipelines using a gas as the carrier medium.) Olivine sand was used as the abrasive and it was projected against the test specimens at velocities and concentrations commensurate with those seen in pneumatic conveyors. In all instances the materials used in the test programme were taken from the same batch so that scatter of experimental results due to specimen variation was minimised. The paper contains a series of recommendations for erosion testing equipment. A discussion based on the results and their applicability to the prediction of wear in pneumatic conveyors concludes the paper.

More public rescues for more private finance failures - a critique of the EC Communication on PPPs

A critique of the EC Communication on PPPs, challenging the scale of state aid offered to PPPs, the role of PPPs in the economic recovery strategy for the EU, and drawing attention to the damage done to public authorities by 'innovative' financing mechanisms.

Energy

The Energy chapter of the Poor Choices report

Introduction

The seven sectors examined in this report represent the goods and services essential for, at the least, social inclusion and, in most instances, survival in a modern society. For the lowest three income deciles, they represent about 60 per cent of total household expenditure. [From final paragraph of Introduction]

The future of energy: are competitive markets and nuclear power the answer?

The inaugural lecture of Professor Stephen Thomas at the University of Greenwich, 4th February 2010. It examines whether further pursuit of competition in energy markets and expansion in the role of nuclear power can be the main elements in a policy to meet goals of security, sustainability and affordability.