Corporate Governance and the Challenges of Economic Transition: The Case of Shanghai Petrochemical Company
A case study of Shanghai Petrochemical Company (SPC) is used to analyse how economic reforms in China have impacted on corporate governance and enterprise performance. Reforms have increased the level of competition and altered the corporate structure of large state enterprises such as SPC. The case examines how SPC had responded to the opportunities and challenges created by the reform process. The case study indicates that despite changes in corporate structure, property rights remained unclear, resulting in a weakened corporate governance structure. Enterprise management had responded in an innovative way to the challenges of more competitive product markets. Improvements in areas such as efficiency, sales and management profile were largely a result of market-oriented reforms. However, weak property rights and a failure to integrate ownership and market reforms more effectively, had lessened the ability of SPC's management to fully exploit new business opportunities. Improvements in efficiency and sales had yet to be reflected in financial returns. This research case therefore indicates that a more integrated approach to enterprise reform is necessary for enterprises to benefit fully from economic liberalisation.
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