THE INFLUENCE OF CORPORATE GOVERNANCE ON CORPORATE VALUE THROUGH THE MEDIATING EFFECT OF THE SOCIAL RESPONSIBILITY IN SHENZHEN OF CHINA

Abstract

Corporate governance has become an important part of the business environment, particularly in Shenzhen—one of China's fastest-growing economic hubs. The goal of the paper is to investigate the complicated relations between corporate governance mechanisms and corporate value and how this relationship responds to corporate environmental practices and social responsibility efforts. Shenzhen is an important place to study these interactions since it is one of the first regions in China to implement reform and expansion. The study seeks to analyze to what extent effective corporate governance structures can foster the increase of firm value through enhanced environmental custodianship and social responsibility performances. As research looking directly at governance over firm value becomes mainstream, studies looking at the indirect relationships mediated by environmental and social factors are emerging as promising areas to work in. The work studies data of listed companies in Shenzhen, including their governance structures, environmental responsibility actions, and performance in several areas of management. It was found that companies with strong governance mechanisms and responsible environments and social practices likely achieve better firm value. Such entities will be more valued by their stakeholders and in the market while, in other cases by this paper, corporate governance periods themselves do not enhance corporate value without any environmental and social credibility. The paper derives recommendations for the management of companies to form integrated frameworks aligning governance mechanisms to their environmental and social responsibility goals. Understanding these mediating relationships is extremely important for Shenzhen companies that are putting efforts to maximize wealth.