An inquiry into whether inside directors of corporations outperform the outside directors in emerging economies: evidence from Chinese corporations in Hong Kong

This research study employs the panel generalized least squares method for estimation of data and to investigate the relationships amongst board governance, inside ownership/directorship and performance of Chinese State-owned H-Shares, red chips and non-H share Mainland private enterprises listed in Hong Kong. This is pursuant to an understanding of the applicability of the notions underpinning the Agency Theory (M.C. Jensen & Meckling, 1976) and the influence of agency issues in emerging economies. Prior research does not examine the relationships amongst these variables and their effects on the performance of Chinese corporations in Hong Kong during 2003 to 2013. Empirical results show that both inside ownership and board governance have negative effects on corporate performance. However, inside directorship has positive effect on corporate performance. Inside directorship is a partial mediator between inside ownership and corporate performance. It is not a moderator between board governance and corporate performance. After all, empirical results suggest that the applicability of the agency theory in relation to board governance, inside ownership/directorship and corporate performance in emerging economies is still indeterminable. Finally, the research study recommends: (a) further research study on the mediating effects of the global financial crisis on the models; and (b) the mixed method research might deal with some qualitative issues for further research study to test the validity of the current theory and models.