Management and Entrepreneurship

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Do agency theory-based “good corporate governance” principles indeed apply to China? A straightforward answer to this question is lacking, because evidence is inconclusive across studies. We endeavor to fill this gap by conducting the first meta-analysis on the China literature with two focuses. First, we assess the impact of (i) board independence, (ii) board leadership structure, and (iii) managerial incentives on firm performance, as these elements have been central to both agency theory as well as to Chinese corporate governance reforms. Second, we extend current theorizing by showing support for the temporal hypothesis, which states that over time, with the improvement in the quality of market institutions and development of financial markets, the monitoring mechanisms become more important whereas the incentive mechanisms lose their significance. In conclusion, in the world’s second-largest economy, agency theory is not only applicable but is also found to be more strongly supported than in its original context.

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Journal of Management Studies

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