Say on purpose: lessons from Chinese corporate charters

Abstract

ABSTRACT What is the purpose of the corporation? The debate has continued for a long time without a clear answer partly because corporate law is often silent or ambiguous on the purpose of the corporation. The debate is largely academic and has limited dialogues with corporations that manage business in the real world. If corporations themselves articulate the purpose in their constitutive documents, it might be helpful to resolve the corporate purpose controversy. China offers a valuable empirical setting to examine how corporations formally state the purpose in their corporate charters. The empirical findings in this article show that the purpose clause in the articles of incorporation is not static but evolving with institutional and organisational demands. However, the purpose clause serves only a signalling or marketing function because of external and intrinsic constraints.