Entertainment expenses account for 18 percent and 15 percent of 2001 (Panel A) and
1999 (Panel B) annual net income, respectively. The high and increasing entertainment
expense amount over the two surveys is hard tocomprehend from a US standard given that
there is typically a limit to the expense amount as required by law. Conceptually, business
owners in the US develop normal business contacts and relationships without incurring
substantial entertainment expenses. US business owners in general are prudent in controlling
entertainment expenses.
Table 2 shows that the levels of entertainment expense are usually high in China. A
high entertainment expense ratio is commonly observed in China among both private and
state-owned firms. This practice of having high entertainment expense ratio deserves more
attention. It is quite common and in fact expected for Chinese business owners to give out
gifts or perks and treat potential clients or local government officials with luxury meals in
order to develop their “Guanxi” (relationship network) with various stakeholders. The Chi
nese accounting rules are more lenient on the nature and amount of entertainment expense.
In addition, managers often abuse the allowance of entertainment expenses and lump their
personal expenses (such as transportation expenses, personal meals and personal entertain
ments) into the company’s entertainment expense. As a result, the entertainment expenses
in China appear to be excessive, and in some sense, can be viewed as negative social capital.
Entrepreneurs’ cumulative charitable contributions through 1999 and 2001 are averaged
at 3 percent and 4 percent of the firms’ total assets, respectively. The increase in donations
over the two surveys reflects: (1) the awareness of social responsibility by the Chinese firms,
and (2) the recognition of the importance of social network established through charitable
donations.
ASP.NET开发写页面样式中如何把兼容性考虑进去Most of the company’s debt comes from bank loans, which represent 61 percent of
the companies’ total debt in 2000 (Panel B) and 68 percent in 2002 (Panel A). The large
bank loans in the balance sheets of the Chinese private firms reflect the fact that China is
a bank-based economy. That is, banks play a critical role in China’s financial system. The
majority of the Chinese private firms’ capital is in the form of equity, which accounts for 68
percent of the total capital in 2000 (Panel B of Table 2) and 78 percent in 2002 (Panel A).
These figures make sense because the business owner needs to contribute the bulk of the
equity investments in the firm.
Most private firms in China are profitable, with 16 percent return on assets and 24 percent
return on equity in 2002 (Panel A of Table 2).
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Three-quarters of the profits are retained in
the firm for reinvestment purposes. That is, the retention rate is 84 percent in 1999, implying
that the payout ratio is 16 percent (Panel B). The payout ratio increases to 26 percent in
2002 (Panel A).
Table 3 displays the correlation results for net income and return on assets with other
variables for 2000 and 2002 survey data. Many of the variables are highly correlated with
net income but insignificantly related to ROA. For example, education, stockholder meeting
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