Determinants of Board Composition

The corporate board is at the centre of corporate governance. Especially during economic transition, the corporate board has played an important role in enforcing government regulations. The China Securities Regulatory Commission issued in 2001, “Guidelines of Introducing Independent Directors”, which stipulated that by the end of June 2003, China’s listed firms must have at least one third of its directors as independent directors in the corporate board. During the split-share structure reform in 2005–2007, the corporate board was an important connection through which non-tradable shareholders were able to negotiate with tradable shareholders for liquidation. Therefore, understanding what determines board composition is crucial for understanding the roles that the corporate board played in corporate governance during economic reforms.