More disclosure

By ISS Global Institutional Investor Study Thursday, 01 June 2006

Poor corporate governance is holding back the growth of China's capital markets, which are consequently lagging well behind the country's economic development.

Near or double-digit economic growth rates compare with a halving in the total value of local stockmarkets in four years to June 2005.

Corporate governance is seen as the greatest risk of investing in Chinese companies by half of surveyed investors; specifically, ownership structures that disadvantage outside investors and the lack of independent directors, regulations and transparency.

Investors also regard corporate governance as more important in China than in any developed market. They view it as a means of improving investment returns and value, as well as a risk management tool.

The most significant changes expected over the next three years are a reduction in the prevalence of non-tradeable shares; more independent boards; the introduction of equity-based pay to align managers' interests with those of minority shareholders; and better corporate disclosure.China: the next global hotspot of corporate governance

ISS Global Institutional Investor Study, 2006
Review by Steve Lodge.