Abstract: Rethinking the Kirby Puzzle: A Reassessment of Chinese Companies' Incorporation from the Public and Corporate Finance Perspectives, 1860-1949
This paper attempts to offer a fresh view to rethink "the Kirby puzzle"—why companies are not well developed in China. In contrast to the commonly held view that the evolution of Chinese companies was the result of government intervention and inefficient legal enforcement, the conclusion of the research presented here is that the arrangement of public/corporate finance is a factor in that evolution. Moreover, based on financial interdependence, large businesses and governments usually formed business-government corporate groups with debt, directorship, and stock interlock during the period from 1860 to 1949. Given this finding regarding the existence of varied business-government corporate groups, a new answer to the Kirby Puzzle is that corporate underdevelopment in modern China was caused by the monopoly of business-government groups.