Institutional Environment, Community Government, and Corporate Governance: Understanding China's Township-Village Enterprises

We study Chinas township-village enterprises (TVEs) from an organizational per-spective with a focus on governance. Unlike most previous studies, we interpret the firm boundaries of TVEs at the community level rather than the enterprise level. From this perspective, we analyze the central role that community governments play in TVE governance as an organizational response to the imperfect institutional environment of both state and market Specifically we show that the community governments involvement in TVEs helps overcome the problems of state predation and underfinancing of private enterprises. We also explain why TVE governance leads to harder budget constraints than state-owned enterprises. 1.