| RiskMetrics China Investors Study Info |
RiskMetrics China Investors StudyRiskMetrics Group Study Identifies Key Governance Challenges for Investors in Greater China Institutional and Enforcement Limitations Pose Risks for Minority Investors MELBOURNE, Australia, April 2, 2008 /PRNewswire-FirstCall/ -- RiskMetrics Group, a leading provider of risk management and corporate governance services to the global financial community, today released through its Governance Services unit a new study contrasting the corporate governance protections available to investors in Hong Kong and China. The report, which examined the governance practices prevalent in these two markets, including regulatory and exchange requirements, found that Hong Kong enjoys a comparative advantage over mainland China in protecting minority investor interests. - - SIDEBAR - -
- - - - - - - - - - - While Greater China has made significant progress with respect to shareholder rights, in both jurisdictions key institutional and enforcement limitations may hide risks for the unwary. With the prevalence of controlling shareholders in both markets, minority investors should pay closer attention to minority shareholder protections than in other markets with broader share ownership. Many Chinese companies are majority-owned by the State, while the Hong Kong market is characterized by family-controlled entities. The report also cautions investors not to over-rely on boards to uphold minority rights, given most directors are effectively appointed by majority owners and related- party transactions are common. "Until share ownership becomes more widely dispersed across the region, investors are unlikely to see progress toward a culture of genuine independent directorship," said David Smith, RiskMetrics Group Analyst and author of the report. "Investors should apply special scrutiny to related-party dealings in the absence of independent boards." The report cited Hong Kong's history and commitment to minority shareholder rights as the source of its comparative governance advantage over the mainland. "While China has moved forward on governance reforms, the report findings showed that these improvements had yet to be tested," added Smith. In recent years, China has reformed its securities markets; mandating independent directors, making it easier to sue directors and bringing financial reporting substantially in line with International Financial Reporting Standards. These shareholder protections have long been established in Hong Kong and the report confirmed that the rules there are consistently enforced for the benefit of investors. The report also demonstrated that foreign acquirers could see bids delayed in China as a result of regulations designed to protect state economic security and well-known brands. Hong Kong does not require quarterly reporting for listed companies and thus lagged China on this material issue. While other financial reporting and auditing requirements in China and Hong Kong are similar, the report found China had a shortage of experienced auditors and accountants. "We hope this study will help investors gain a better understanding of the governance risks of investing in either Hong Kong or China," added Smith. "In the absence of robust and proven institutions for protecting minority shareholders, the best protection is likely to be caution." Profit from the Marl stock trading robot... Click here - - - - - - - - - - - RiskMetrics Group will hold a special forum, Corporate Governance in Greater China, to share the findings from the study on Tuesday, April 8 at 1:00 pm Australia EST, 11:00 am HKT, SGT, CST, 12:00 pm JST. To register for the webcast, please visit: http://www.riskmetrics.com/webcasts/2008china_hk_corp_gov/index.html. Top of this RiskMetrics China Investors Study page.
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