ABSTRACT
This chapter addresses the roles of politicians in business activities in the context of China's partial privatization, and examines the structure of the boards of directors of 621 companies that went public in China during the period 1993-2000. It focuses on the degree of politicians' presence on boards, and how that presence contributes to the professionalism of the boards and the firms' operational efficiency. The chapter provides the institutional background of China's decentralization and state enterprise reform, and analyzes the competitive and agency effects of the decentralization. It develops hypotheses about how the board presence of politicians affects board professionalism and other characteristics, government subsidies, employment, and firm performance. The chapter describes the sample and board characteristics, report empirical results. It argues that local politicians use their administrative power to influence both the markets and the firms under their jurisdictions.
