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Yueh-Ping Yang

Yueh-Ping (Alex) Yang

National Taiwan University Law School, Assistant Professor

S.J.D. 2017

yyang at sjd.law.harvard.edu

Dissertation

Crouching Tigers and Hidden Dragons in the Great Wall Street: Corporate Governance of Commercial Banks in the State Capitalist China

Click to expand the dissertation description

As China’s economic growth slows, its banking sector has come to a crossroad.  Notwithstanding its enormous growth and satisfactory financial performance in the last decade, Chinese commercial banks now face rising non-performing loans, deteriorating profitability, constricting financial constraints, and challenges from ongoing internationalization.  Underlying these problems is the banks’ unbalanced pursuit of multiple objectives, which mainly results from the Chinese party-state’s dominance of banks’ executive team and marginalization of private capital.

This dissertation addresses the above problems from a bank governance perspective in three principal sections.  The first examines the corporate governance practices of Chinese commercial banks.  Historically, the Chinese party-state routinely reacted to crises in China’s banking sector by leaving slightly more space for private capital to resolve crises.  After several such retreats over the past four decades, private capital has increasingly entered into China’s banking sector, holding a significant amount of ownership and even directorship of Chinese commercial banks.  The Chinese party-state, however, remains in control of most major Chinese commercial banks through its dominance of the appointment power over banks’ top executives.  This party-state-dominated model of bank governance may have advantages in the coordination of the state’s developmental policies and the discipline of the insider misbehavior.  That said, whether this model can really efficiently pursue the party-state’s policies and whether it will jeopardize the safety and soundness of Chinese commercial banks, is questionable.

The second section of this dissertation empirically investigates the advantages and disadvantages of the party-state-dominated practice in China.  Using the types of banks and the executive composition of banks as the proxies for the party-state’s intervention, this section examines the relationship between the level of party-state intervention and bank performance in the aspects of profitability, business innovation, risk management, and policy cooperation.  On balance, the empirical evidence indicates that more party-state intervention in a bank is associated with significantly superior policy cooperation yet poorer business innovation and risk management, as well as slightly poorer profitability.  Assuming that business innovation and risk management are the two major areas in which Chinese commercial banks urgently need upgrades in order to reduce the likelihood of another round of local financial crisis, the above empirical findings suggest that the party-state-dominated model in China is approaching its limits and that significant changes are imminent.

The third section of this dissertation discusses how China should reform its bank governance practice.  On the one hand, it reviews the experience of the East Asian developmental states and concludes that ownership privatization is not the only solution.  On the other hand, it provides a critical view of the bank governance reform proposals currently on the table, including the expanded entry of private banks and the mixed ownership reform adopted by the Chinese party-state.  Acknowledging that the current bank governance problem in China is the party-state’s excessive intervention in banks’ executive composition, this section advocates an executive reform that permits more representatives appointed by private block-holders to assume bank executives.  To implement this idea, it proposes two specific methods: the first one is a more aggressive reform featuring the state-owned-private-operated model, under which the Chinese party-state, given its ownership, delegates the executive power of banks to private block-holders.  The second is a less radical reform featuring the shared-management model, under which the Chinese party state, while maintaining its executive power, shares some of the bank executive seats with private block-holders.  The ultimate goal is to permit private block-holders more executive power so as to facilitate the deliberation of a finer balance between the party-state’s interest and the bank’s business interest.  This would prompt the Chinese commercial banks to not only run their businesses more efficiently but also perform the social policies more efficiently.

Fields of Research and Supervisors

  • Corporate Theories and Empirical Study with Professor Reinier H. Kraakman, Harvard Law School, Overall Faculty Supervisor
  • Comparative Corporate Governance and Political Economy with Professor Mark J. Roe, Harvard Law School
  • International Finance and Banking with Professor Hal Scott, Harvard Law School
  • Global Economy, China Economy and China Laws with Professor Mark Wu, Harvard Law School

Additional Research Interests

  • Corporate Governance
  • Financial Regulation and Securities Regulation
  • Law and Economics
  • International Economic and Trade Laws

Education

  • Harvard Law School, S.J.D. Candidate 2012 – 2017
  • Harvard Law School, LL.M. 2012
  • National Taiwan University, College of Law, LL.M. (Civil and Commercial Law Division) 2010
  • National Taiwan University, College of Law, LL.B. (Economic and Financial Law Division) 2005

Academic Appointments and Fellowships

  • National Taiwan University School of Law, Assistant Professor, 2017 – Present
  • National Taiwan University School of Law, Asian Center for WTO & International Health Law and Policy, Researcher, 2012 – Present
  • Harvard Law School, LL.M Writers’ Workshop, Teaching Assistant, 2016 – 2017
  • Harvard Law School, Corporate Law, Finance, and Governance Concentration, Teaching Assistant, 2015 – 2016

Representative Publications

Additional Information

Languages: English, Mandarin Chinese

Last Updated: July 18, 2017