Seminar presentation by Sven Modell and ChunLei Yang of the Alliance Manchester Business School, UK, on Financialisation as a Strategic Action Field informed by corporate governance reforms in Chinese State-Owned Enterprises. This seminar was delivered to the Performance Management research cluster of the Whitaker Institute, NUI Galway on 13th march 2017.

1. Financialisation as a Strategic Action Field:
An Historically Informed Field Study of Corporate
Governance Reforms in Chinese State-Owned
Enterprises
Sven Modell
ChunLei Yang
Alliance Manchester Business School

2. Setting the Stage …
“The [World Bank] used to think favourably of our SOE reform. Now it changed its tone of voice and
tried to tell us what we did not do right and what we should do because it noticed how strong we
have become and it felt a bit paranoid. […] The report was motivated by a growing sense of fear of
our outstanding performance in the international capital market. As such, the recommendations
must be examined with considerable care and caution. Central SOEs are instrumental to China’s
economic development. Together we generated 20 trillion sales in 2011, 1 trillion profit, providing
16.25 per cent of national fiscal income. […] What do these numbers tell you? Seeking truth from
[these] facts, we have already carved out a successful model of reform and we must continue
doing what we know is right, rather than being swayed by politically motivated ideas such as
privatization/ marketization […] I fundamentally disagree with what was said in the report. He [the
Head of the World Bank] should try to learn from us. […] Why did so many American firms
collapse? What made you think you can lecture us?”
(The former Secretary-General of the SASAC discussing the World Bank’s country report for China at
a press conference, 5 March 2012).

3. Background and Motivation
• The financialisation of corporate governance attracting significant attention
in accounting research and related disciplines over the last decade.
• Mainly associated with Anglo-American, shareholder-focussed governance
practices, which are increasingly diffusing to other parts of the world
(including emerging economies).
• Recent calls for greater contextualisation of this research agenda to
understand how tendencies towards financialisation give rise to
countertendencies, which prevent economies from becoming fully
financialised (Müller, 2014; van der Zwan, 2014)
• Examining how the context-specific meanings attributed to shareholder-
focussed governance practices take shape is vital for understanding how
such practices are institutionalised and affect economic and social
development.

4. Research Questions and Theoretical Focus
• How is accounting is implicated in corporate governance reforms in emerging
economies and how does this imbue shareholder-focussed governance practices
with context-specific meanings?
• We explore these questions in the context of Chinese state-owned
enterprises (SOEs) over more than three decades (1978-2015).
• We analyse our findings based on the theory of Strategic Action Fields
(SAFs) (see Fligstein & McAdam, 2011, 2012).

5. The Theory of Strategic Action Fields
• The theory of SAFs partly evolved in dialogue with institutional theories of
organisations.
• Primarily concerned with how templates for collective action (field rules)
evolve and how socially embedded actors with more or less competing
interests vie for power and influence over such templates.
• Similar to emerging, issue-based approaches to the analysis of institutional
fields (e.g., Hoffman, 1999; Wooten & Hoffman, 2008), but offering a
distinct conceptual apparatus for examining the socio-political processes
through which conflicts emerge and are settled.
• In contrast to more conventional notions of institutional fields (e.g.,
DiMaggio & Powell, 1983), this brings heterogeneity, conflicts and power
struggles to the fore and directs attention to how “new” fields emerge.
• SAFs may emerge within broader state or non-state fields or at the
intersections between such fields.

6. The Theory of Strategic Action Fields
• Three key categories of actors:
- Incumbents: centrally positioned actors dominating an SAF and
whose interests and values have historically shaped the field.
- Challengers: more peripheral and less influential actors advocating
alternative templates to those dominating a field.
- Internal Governance Units (IGUs): actors which are internal to the
SAF and charged with devising and monitoring compliance with field
rules.
• The mobilisation of collective action hinges on the social skills exercised by
these actors.
• In the present paper we primarily examine social skills exercised through the
framing of governance reforms by diverse actors and distinguish between
strategies of frame shifting and frame blending to this end (cf. Werner &
Cornelissen, 2014; Yang & Modell, 2015).

7. The Theory of Strategic Action Fields
• The evolution of SAFs generally goes through three phases:
- Destabilising changes (e.g., exogenous shocks, escalating
crises) in the wider social context in which SAFs are embedded.
- Episodes of contention where alternative templates of
organising are crystallised and become subject to political
contestation.
- Institutional settlement where a greater or lesser degree of
consensus around emerging field rules is established.
• Throughout these phases incumbents, challenger and IGUs jockey for
influence and power, but the salience of each actor may vary across
the phases.

8. Research Methods
• Focus on the development of corporate governance reforms in Chinese SOEs
between 1978 and 2015.
• An historically informed field study approach informed by documentary evidence,
extant academic research and interviews.
• Particular attention paid to the formation and actions of IGUs, such as the
National Administrative Bureau for State-Owned Property (NABSOP) and the
State-Owned Assets Supervision and Administration Committee (SASAC).
• Interview data collected 2009-15, which was a particularly intensive period of
shareholder-focussed governance reforms.
• Open-ended coding of data throughout data collection process.
• Thematic, theoretically informed coding focussed around SAF framework and
following a temporal bracketing approach (Langley, 1999).

9. Phase 1 (1978-93) Initial Destabilising Changes
• SOEs traditionally embedded in a complex “matrix system” set up to safeguard political and
ideological control exercised by the Party/Government within a centrally planned economy in the
Maoist era (pre-1978).
• The World Bank first invited to China in 1983 and carrying out small-scale studies of the
possibilities of reforming SOEs in collaboration with Chinese authorities. Possibilities of openly
challenging embedded governance practices limited at this stage.
• The Contract Responsibility System (CRS) reform unfolding from mid-1980s and gradually
transforming SOEs into independent legal entities. Various experiments with private shareholding
from the late 1980s.
• Establishment of the NABSOP as a first, rudimentary IGU in 1988, but its mandate to reform
accounting and governance practices severely circumscribed by the matrix system.
• No discernible frame shifting. The Party/Government engaging in an element of frame blending,
but domesticating and distancing reforms from any ostensible “Western” influence.
• Weak field rules, compelling SOEs to priorities financial performance, and SOE losses escalating
from the late 1980s.

10. Phase 2 (1993-2003) Episode of Contention
• Formal enactment of “socialist market economy” in 1993 and creation of domestic stock markets
in early 1990s.
• Continued escalation of SOE losses and the CRS reform officially declared a failure in 1995.
• The World Bank assuming more obvious challenger role, propagating accelerated privatisation of
SOEs and crystallisation of the role of the State as shareholder, from the mid-1990s
• The World Bank engaging in increasingly pronounced frame shifting including explicit references
to agency theory and the maximisation of shareholder value as the epitome of “good” corporate
governance.
• The Party/Government continuing to engage in frame blending, by framing privatisation framed in
terms of “corporatisation/commercialisation” and selectively borrowing of “Western”
governance concepts, but distancing reforms from any ostensible “Western” influence.
• No real change in the matrix system. The NABSOP dismantled in 1998 and field rules, aimed at
financial performance improvements, remaining relatively weak.

11. Phase 3 (2003-15) Institutional Settlement
• Dismantling of the matrix system and formation of the SASAC in 2003.
• The SASAC given a clearer mandate to develop accounting-based governance mechanisms
supporting the role of the State as shareholder, but also required to balance this with broader
social/political objectives.
• The SASAC starting to experiment with “Western” shareholder-focused performance
management practices, notably Economic Value Added (EVA), but framing them as an indigenous
initiative epitomising the pinnacle of “correct thinking” in the “modern” reform era (i.e.
continued frame blending combined with domestication of reforms).
• The EVA system carefully trialled from 2003. Implemented on a “voluntary” basis from 2007 and
only compulsory for SOEs in 2010 to shift the emphasis of SOE strategies from growth in size to
growth in returns.
• Cautious approach to the use of other shareholder-focused governance mechanisms, such as
stock options, and maintenance of a conservative approach to incentivisation. Political incentives
of SOE executives still very important.
• New field rules, centred on EVA, gaining traction as the SASAC combined coercive measures and
ideological control with extensive consultations with SOEs while relaxing performance pressures
in the wake of the recent slow-down in the Chinese economy.

12. Phase 3 (2003-15) Institutional Settlement
(cont.)
• The SASAC’s framing of governance reforms largely equated notions of shareholder value with the
interests of the State as shareholder and the need to re-orient the strategies of SOEs towards
growth in the value of state assets. Little concern with minority shareholder rights and reduced
state control of SOEs.
• The World Bank continuing to engage in frame shifting and losing influence since the late 1990s,
but still seen as a potential threat to the stability of the emerging SAF (evident in the SASAC’s
rebuttal in 2012).

13. Conclusions
• Our findings are largely consistent with the theory of SAFs, but in contrast to prior accounting research in
emerging economies (see Hopper et al., 2009, 2016; van Helden & Uddin, 2016) we draw attention to the
limited challenger role of international donor organisations.
• We extend Fligstein & McAdam’s (2011, 2012) view of framing as a means of establishing field rules by
showing how frame blending is consistently combined with frame decoupling (Fiss and Zajac, 2006; George
et al., 2006) to shelter an emerging SAF from more radical challenges.
• IGUs, enjoying strong support from key incumbents, can play an important role in pursuing such two-
pronged framing strategies, but their ability to do so is conditioned by the surrounding, institutional
infrastructure (cf. Power, 2016).
• Our findings extend research on financialisation by drawing attention to the skilful, institutionally embedded
agency involved in imbuing shareholder-focussed governance practices with context-specific meanings
(Meyer & Höllerer, 2010, 2016; Yoshikawa et al., 2007) and how IGUs can moderate the pressures for
financialisation that originate in capital markets.
• We also extend research on accounting in emerging economies by pointing to the critical, but under-
researched, role of IGUs in adapting “Western” governance practices (Hopper et al., 2016; van Helden &
Uddin, 2016).
• The theory of SAFs a useful vehicle for linking research on financialisation and accounting in emerging
economies and may be extended to explore the institutionalisation of other accounting practices in such
contexts.