find that HK-listed
companies are predominantly controlled by families.
According to our dataset, most of the top-100 listed
companies are family-based or group-based, and 25
of the 100 highest-market-value companies are controlled
by 10 big families. Substantial shareholders’
family relationships severely weaken the external
force to monitor firms. It appears that the familybased
controlling shareholders may use their
controlling power to ‘tunnel’ a company’s value
into their own pockets (Johnson et al., 2000).1
Therefore, internal governance mechanisms are
critical aspects of CG in HK.