November 15 to 16 2003, supported by the Ministry of Education, National Natural Sciences Foundation, National Auditing Bureau etc., Nankai International Business Forum, International Business School of Nankai University, Center for China Financial Research, the University of Hong Kong, and Research Center of Corporate Governance of Nankai University held the 2nd international Symposium for Corporate Governance on the subject of Corporate Governance Reform and Management Innovation. Government officials, entrepreneurs and scholars in Mainland China, and scholars and entrepreneurs from Germany, the US, Japan, Britain, Canada and Korea attended the meeting. They explored topics of Current Status, Problems and Investment Relationship of Corporate Governance in China, Method and Fruit of Corporate Governance in Worldwide, Capital Structure, Equity Structure and Investment Relationship, Internal Governance Mechanism: Governance of Board of Director and Incentive of Managers, Capital Market, Mergers, and Investment Performance, Corporate Governance and Business Administration, Corporate Governance Evaluation and Corporate Performance, the Governance of New Enterprises, Governance Patterns and International Comparison.

Ⅰ. Topic Representations of the Symposium

Jiang Zhenghua gave a lecture of Perfecting Corporate Governance Structure and Speeding Industrial Management Reform. By reviewing the history of Economic Institution Reform and Enterprise Reform, he suggested directions for corporate governance research and practice, pointed out problems faced by Chinese enterprises, and discussed the important role of corporate governance for enterprise survival and growth. He argued that, in the background of adjustment of world economic structure, the globalization of capital market, the rapid development of network economy and virtual economy, and the changes of management method, Chinese enterprises were confronted with many challenges and opportunities. But the problems of economic and social systems in China curbed the development of enterprises in the new environment. Corporate governance reform could break through these barriers, because enterprises are cells of an economy and a well-behaved corporate governance structure and mechanism could promote the growth of enterprises, and promote economic development therefore.
1994 Nobel Laureate in Economics and one of the founding fathers of Game Theory and experimental economics, Reinhard Selten gave a lecture on Bounded Rationality and Economic Behavior. Professor Selten argued that the development of economic theories focused on bounded rationality of human behaviors resulted in behavioral revolution of economics. Neo-classical economics presumes human rationality and is syllogistic, while behavioral revolution is based on practical economic behaviors and is inductive. In the economic activities of reality, preference judgments and probability judgment are influenced by human attention and other factors, so they are uncertain. Therefore, traditional economics that starts at unbounded rationality is unreliable. In fact, due to bounded rationality, many human judgments are not dependent on accurate probability analysis. Therefore, economics should do inductive analyses on human economic behaviors in reality. Experimental economics is just a new research domain based on these ideas.
On the relationship between "behavioral revolution" of economic and corporate governance, Professor Selten pointed out the effects of development of game theory and experimental economics on the economic theories and practical enterprises' activities. If we didn't know basic human behavioral rules, we couldn't design a good corporate governance structure. The domain has not been studied deeply, so it needs more efforts in future.

Ⅱ. Corporate Governance Forum

This conference took the form of forum discussion. Guests exchanged views on themes such as the current status of corporate governance in China and Methods and Achievements of Corporate Governance in Worldwide.

1. The Current Status, Problems and Measures of Corporate Governance in China
Daochi Tong considered that, it should establish electronic voting systems, enhance the role of independent directors, develop institutional investors, improve offering systems, establish intermediate guarantee systems, shareholder suit system and exit mechanism, therefore improve corporate governance reform.
Based on his empirical studies in stock market in China, Professor Frank M. Song rebuked the view of "stock market in China is useless", and pointed out corporate governance mechanism played a very important role in stock market.
Professor Wei-an Li suggested ten changes of current status and tendency of researches on corporate governance: from corporate governance structure to corporate governance mechanism, from governance of single corporations to the governance of enterprise groups, from theories of corporate governance to practice of corporate governance, from qualitative studies to quantitative studies, from corporate governance to firm governance, from the study of governance objects to the study of governance subject, from governance of business corporations to governance of non-profit organizations, and to the governance focused on governance and society.

2. Methods and Achievements of Corporate Governance in Worldwide
Katrina Tai introduced Standard & Poor's rating index of corporate governance. This index includes: (1) ownership structure; (2) shareholder relationship; (3) financial transparency and information disclosure; (4) the structure of board of directors; and the influences of external environment (such as law, regulation, information, markets, etc.)
Professor H. Fan believed that institutions played an important role in corporate governance, so it should consider this factor when comparing corporate governance structure of different countries.
Hitsuhiro Hirata pointed out the important and fundamental roles of corporate governance, and the financial scandals of America were results of long ignorance of corporate governance in boom.

Ⅲ. Panel Discussion

1. Capital Structure, Equity Structure and Investor Relationship
In their paper An International Comparison of Capital Structure and Debt Maturity Choice, Professor Joseph F. P. Fan and his fellows reported large variations in corporate capital and debt maturity structures across 39 developed and developing countries during 1991-2000 that can not be explained by firm or industry factors alone. They identify a set of country/institutional factors that contribute to these variations. Overall, institutional factors are critical determinants of firms financial structures.
In his paper Ownership Reform, Corporate Governance and Banking Reform in China, Xiaohong Wu assess the impact of state ownership on moral hazard in the state banks through an examination of China's economic development model and the dominance of the state banks. She suggests that only through providing better financial services for private enterprises and non-SOEs, and retaining the regulation of finance, the state can promote ownership reform of state-owned commercial banks.
In their paper The Effect of "Cross-shareholding" on the Corporate Governance: Taiwan Experience Xiufen Hong and Guiduan Chen explored the negative effects of cross-shareholding. They suggest that, numerous companies are engaged in cross-shareholding arbitrage and mortgage on stock to implement their financial management. The circulation of accommodation is easy to bring about financial crisis during the period of stock recession. Besides, the cross-shareholding lead to the management can control the shareholders' meeting and prevent it from supervision.

2. Internal Governance Mechanism: Governance of Board of Director & Management Incentive
In the paper An Empirical Study of the Relationship between the Ownership Characteristics and the Board Leadership, Feng Zou and Xiao Chen examines the relationship between the ownership characteristics and the board leadership for the firms that went IPO before the end of 1998. The major findings include: (1) the portion of the firms that the board chairman also serves as the CEO is decreasing year by year, (2) the existence of state shareholdings will increase the likelihood that the board chairman and CEO are the same person, (3) firms controlled by apparent company or by the central government more likely appoint its parent's chairman as the chairman the listed firm, (4) the higher percentage of the controlling shareholders' ownership, the more likely the parent's chairman will serve as listed firm's chairman.
In their paper Announcement of Mutual Fund Managers Turnover and Market Response: An Empirical Study of Close-ended Fund Market in China, WeizhengYu and Minlei Ye suggest that announcements of fund manager turnover cause market attention, which indicate fund managers as intangible assets of fund, have considerable weight in the eye of investors. When former managers were dismissed due to poor performance, fund companies tend not to disclose the event in announcement. When fund companies announce the reason why managers were dismissed, investors would believe the turnover was not due to poor performance. So the agency cost would exceed the level investors expected.

3. Capital Market, M & As and Investment Performance
Bernard Yeung reported in their paper Capital Markets and Capital Allocation: Implication for Economics in Transition that in many countries elite (often the descendants of industrial barons who grew rich off political "connections" during early stages of development) control most large corporations through "pyramidal" corporate groups. This corporate control gives the elite vast rent-seeking powers, which it uses to limit outsiders' property rights and financial system from functioning well. The initial stages of this process of "economic entrenchment" may be under way in many transition economies. Economics openness may limit this sort of "economic entrenchment", and thus contribute to institutional reform and economic growth.
In their paper Disclosure, Corporate Governance, and the Cost of Equity Capital: Evidence from Asia's Emerging Markets, K. C. John Wei and his collaborator examined the effect of disclosure and other corporate governance mechanisms on the cost of equity capital in Asia's emerging markets. They found that both disclosure and non-disclosure corporate governance mechanisms have a significantly negative effect on the cost of equity capital. In addition, the effect of non-disclosure governance mechanisms is more profound than that of disclosure on the cost of equity capital. Their findings suggested that infrastructural factors, such as the legal protection of investors and the overall level of corporate governance, are not well established, reducing the expropriation risk by strengthening overall corporate governance appears to be more important in reducing the cost of equity capital than adopting a more forthright disclosure policy.
Jiangyong Lu reported in their paper The Choice of Multinational firms between Acquisitions and Greenfield Start-ups: The Impact of Task-specific and Location-specific Knowledge, prior experience should be examined from the perspective of task-specific knowledge and location-specific knowledge. They expected that firms will favor acquisitions when they posses more task-specific knowledge about acquisitions. However, firms will be less so when they possess inadequate location-specific knowledge. Further, firms are more likely to acquire local firms that share a higher level of product relatedness. Empirically, their study was based on a sample of 2,152 partial diversifications in China in 257 product sectors from 23 countries between 1985 and 2001. The findings largely support their hypotheses.

4. Corporate Governance and Enterprise Management
In his paper Productivity, Ownership and Management Compensation: Evidence from China, by establishing a model about the relationship between enterprise operation status (sales, profit, marginal value and Growth Rate of these variables) and Institutional variables (property rights structure and index of corporate governance status) and analyzing the data of 1,500 firms surveyed by World Bank, Yifan Hu reported that private equity is more productive than state-owned equity and effective manager incentive mechanism can improve enterprise operation status.
Based on legally understanding of corporation, Shanghong Qi et al. studied the corporation essence - aggregate persons, combining the fields of modern psychology, ethnics and sociology. And at the same time the conception of "Corporation Personality" is given in the article. What's more, the scandals in the world famous corporations such as Enron have shown that the corporation spirit and personality can be the key factors to affect the system. Therefore understanding the corporation personality and the process will become the important part of spirit governance.

5. Corporate Governance Appraisal and Corporate performance
In the report A Study of Corporate Governance Index for Chinese Listed Companies and Its Application, Professor Wei-an Li concluded the theoretical framework and application of Corporate Governance Index for Chinese Listed Companies (CCGI) conducted by the project Team of the Research Center of Corporate Governance of Nankai University. The rating system includes more than 200 indexes, covering 6 major dimensions. Corporate Governance Index for Chinese Listed Companies (CCGI) is the barometer of corporate governance state. Based on the analysis of CCGI's function, they constructed the CCGI according to the corporate governance appraisal theory.
In the report Appraisal and Application of Board Control Mechanism based on Credit, Yongzhen Xie designed the appraising index system of board control mechanism based on the credit of company. And then put forward the appraising model of board control mechanism in order to observe the influence of board control mechanism on the credit of company. The empirical experiment is also conducted to observe the relationship between board control mechanism and the credit of company, and to know the condition of institutional building of corporate credit guarantee.
In his report An Empirical Study of the Correlation between Corporate Performance and Corporate Governance, using linear regression model, from the point of view of accounting auditing, Xinsheng Cheng analyzed the correlation between governance efficiency and corporate financial performance. The report suggests that corporate governance includes internal and external governance. Internal governance mechanism comprises board of director control, board of supervisor control, internal auditing etc. External governance includes independent auditing, intermediate monitoring and governmental regulation.
Xiaosu Zhou and Cuixiang Tian reported in their paper An Analysis of the Current Status of Earnings Management, Root and Economic Consequence, that Earnings Management has influences on resource allocation and decision-making of enterprises, shareholders, creditors and government. Due to China's special economic environment, earnings management in China has particular motives and methods. Along with the reform of property rights and normalization of regulation systems, the scope for earnings management will become small. However, because of agency problem and the incompleteness of institutions, earnings management would not completely eliminated.

6. The Governance of New Enterprises
Junxi Zhang and Hua Zhang in their paper Performance and Governance Structure of Privately-owned List Companies in China, by analyzing listed companies in Shanghai and Shenzhen stock exchange, compared the difference in performance between privately owned corporations and non-privately-owned corporations, and then analyzed the cause of the difference. They considered the reason why privately owned companies are better than non-privately owned companies in operation, profit, and capital structure and market appraisal is the difference in corporate governance efficiency, and then made an econometric test.
Li Yu, l Libo Ma and Yafeng Sun in his report Three-circle pattern of Family-controlled Firms' Corporate Governance focused on the research of corporate governance on family-controlled patterns according to the fruitful research on real life, then summed up a general rule characteristic of a three-circle pattern, on the basis of which explores the effective performing patterns and explains the reasons why there lie conflicts on family members such as the conflicts on their position and responsibility, distributions of power. Finally, it measured the demand on family systems, non-family systems and the whole business systems by dictating the complicated interactions among all members in the family-controlled enterprises, hoping it can provide a way of thinking about solving the problems on the family-controlled firms.
In his paper From mainstream Corporate Governance to New Enterprise Governance: the Raise of Human Capital Owners and High-tech Enterprise Governance, Qinghong Yuan considered that the corporate governance study of the principal-agent problem of matured companies going public has become the mainstream subject, but this situation has been facing a series of serious challenges in recent years. New economy and new enterprises have risen to change the relative scarcity and allocation mode of enterprise resources. The increase of "negotiation power" of the human capital owner has resulted in significant changes in the corporate governance level. In the opinion of author, new enterprise governance structure obviously relies on the situation of human capital value of enterprises.

7. Governance Pattern and International Comparison
In the report The Changes of Board of Director in Japan, Professor Mitsuhiro Hirata reviewed the institutional changes of corporate governance and management in Japan after World War Two, and concentrated on the current status and problems of board of directors in Japan. He discussed the reform direction of corporate governance of big companies from the point of view of business
In his report The Formation of Japan Styled Corporate Governance: Decrease in Complexity and Uncertainty of Operation Environment, from comprehensive, historical and evolutionary the point of view, he argued that the formation of Japan styled corporate governance is the motives for decreasing uncertainty and complexity of operation environment in growth, and therefore provide a new research direction and method for the transition of corporate governance pattern.
Corporate governance model is a result of the institution evolution, but there are some different opinions on the what factors promoting the corporate governance model to change and whether the corporate governance model to show the characters of unique, differentiation or alike. In the report The Evolution and Trend of Corporate Governance Pattern, Chuang Gao analyzed the inside mechanism which promote the corporate governance model's evolution, basing on a basic analysis framework, it will compare among these three opinions and those theoretical explanation, and will giver some comment.

Ⅳ. Summaries

1. Significance of the Conference
The two consecutive international symposiums on corporate governance in Nankai University provided opportunities for government officials, enterprises and academia to know the current status of corporate governance theories and practice, and a platform for further studies of corporate governance through mutual exchange. These symposiums promoted the role of corporate governance in economics, management science and other related discipline in the background of Enron and WorldCom Scandals.
Just as Mayor of Tianjin said in the ceremony, "the study of corporate governance is an emergent theoretic task for government and enterprises… In market economy, the key elements of enterprise institution are property rights and corporate governance. I believed that the establishment of modern enterprise institutions, especially the establishment of a constraint mechanism among shareholder assembly, board of directors, board of supervisors and managers. I considered that this conference is more important than introduction of billions of foreign investment. The fruits of this symposium will do an important role in economic construction."

2. Major Academic Fruits
Compared with the 1st International Symposium on Corporate Governance, this symposium has obvious increase in the numbers of members, academic positions of guests, the diversity of nationality of guests, and the numbers and quality of papers submitted. The breakthrough in academy of this symposium can be concluded as follow:
(1) The Deepenness of Empirical Studies
Studies such as China's Corporate Governance Index conducted by Research Center for Corporate Governance and Performance and Governance Structure of China's Private Public Listed Companies conducted by Center for China Financial Research, the University of Hong Kong, gave detailed analyses of governance status of publicly listed companies and private listed companies, and provided materials and method for further studies.
(2) Extension of Directions and Innovation of Methods
The landmark of the symposium was the foundation of Selten Laboratory for Experimental Economics. It is an interdisciplinary, transnational and open laboratory. By using experimental and game methods, corporate governance can make progress with micro analyses of group behavior within companies.
Besides, many studies adopted new perspectives, such as new institutional economics, transitional economics, comparative institutional analysis, and game theory, to study corporate governance, and enriched and extended the research of corporate governance.
(3) Internationalization of Research
A Significant character of the symposium was the comparative study of corporate governance patterns. Many researchers compared the formation, structure and function of corporate governance in different countries and districts, and provided direction to understand the diversity and convergence of corporate governance patterns.
(4) The Deepenness and Differentiation of Research
From the point of view of deepenness of research, This symposium gave ten changes of current status and tendency of researches on corporate governance: from corporate governance structure to corporate governance mechanism, from governance of single corporations to the governance of enterprise groups, from theories of corporate governance to practice of corporate governance, from qualitative studies to quantitative studies, from corporate governance to firm governance, from the study of governance objects to the study of governance subject, from governance of business corporations to governance of non-profit organizations, and to the governance focused on governance and society.
From the point of view of differentiation, first, this symposium studied the role of shareholders, employees, managers, and other stakeholders in the field of governance subjects. Second, many papers gave detailed analyses on the relation between corporate governance and operation objectives, operation strategies, resource allocation and corporate culture. Furthermore, the research scope covered SOEs, private enterprises, family-controlled firms and high-tech firms. Third, a few researchers studied corporate governance in different industries and regions.
In summary, this symposium concentrated the theme Corporate Governance Reform and Management Innovation，and made deep studies of the difference and relationship between corporate governance and management innovation. This conference explored themes such as the Condition, Problems and Investment Relationship of Corporate Governance in China, the Method and Fruit of Corporate Governance in Worldwide, Capital Structure, Equity Structure and Investment Performance, Corporate Governance and Business Administration, Corporate Governance Evaluation and Corporate Performance, the Governance of New Enterprises, Governance Patterns and International Comparison, etc. and reached agreement on following points (1) The importance of corporate governance research and practice. (2) The basic role of empirical analyses, especially corporate governance index, in provide foundation for theoretical studies and governmental decision-making. (3) It should extend research into areas of government, investor relationship and non-profit organization. (4) It should establish authoritative and fundamental database about publicly listed companies in China.
The consummation and fruitful achievements of this symposium would promote corporate governance reform and management innovation worldwide and have far-reaching significance.