Hong Kong's securities regulator on Wednesday highlighted corporate governance' s crucial role in the city's capital market, as it lays the groundwork for effective risk management and decision-making, promotes sustainable corporate growth, and boosts investor confidence in listed firms.

“Market integrity, transparency, and resilience are critical to the sustainable development of our listing market, all of which are anchored in strong corporate governance,” Kelvin Wong Tin-yau, chairman of the Securities and Futures Commission (SFC), said at the Hong Kong Capital Markets Forum 2025.

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“In today's dynamic and competitive financial markets, only the fittest will thrive, and companies with sound corporate governance will attract investors,” Wong added.

According to a December 2023 report by the Asian Corporate Governance Association (ACGA) and securities brokerage CLSA, companies in Asia with higher corporate governance scores delivered significantly better shareholder returns. Over a five-year span, the top 20 percent of companies with strong governance outperformed the bottom 20 percent by six percentage points in annualized stock returns, underscoring the tangible benefits of sound governance practices.  

Wong highlighted Japan as a model for how governance reforms can drive market performance. Following governance reforms in early 2023, the Nikkei Index reached record highs last year, with listed companies increasing shareholder returns through dividends and buybacks.  

Investor confidence is critical to Hong Kong's standing as a global financial hub. Companies with strong governance frameworks are less likely to face scandals involving financial mismanagement, fraud, or conflicts of interest, which can erode market trust. 

Poor governance, on the other hand, often leads to regulatory intervention and shareholder losses. According to the SFC, nearly 400 instances of non-compliance with listing rules were identified between 2022 and 2023, which involved failures in timely disclosure of material information.

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Hong Kong has made significant strides in improving corporate governance over the years, with recent initiatives aimed at aligning local standards with global best practices. For example, enhancements to the Corporate Governance Code, set to roll out in phases following a 2024 consultation, and a focus on improving board diversity, tenure limits, and evaluation processes.

Addressing the same event, Qi Bin, deputy director of  the central government's liaison office in the Hong Kong Special Administrative Region, suggested exploring the development and publication of a White Paper on the city's capital markets, proposing recommendations for enhancement based on the highest global standards, and outlining a road map and timeline for reforms.

Acknowledging that there is room for improvement in Hong Kong's market regulation, transaction costs, and corporate governance, Qi said the initiative aims to encourage joint participation from the government, the industry, and other stakeholders, and encouraged feedback from global mainstream institutional investors and internationally renowned financial institutions.

Qi, who is the former vice-president of China's sovereign wealth fund, said such efforts would demonstrate the sincerity and determination behind the reforms and enhance international market confidence in Hong Kong.

Financial Secretary Paul Chan Mo-po in his speech stressed the importance of maintaining financial security and the need to take a determined approach to reform.

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Chan likened the relationship between maintaining a high level of security and promoting high-quality development to the two wheels of a car, working in tandem. “Currently, through cross-market and around-the-clock monitoring, we have not detected any anomalies. Hong Kong's financial system has remained stable and continues to operate smoothly,” he stated.

Chan also highlighted that continuous efforts will be made to reform and expand Hong Kong’s capital markets. This includes deepening cross-border investment programs with the Chinese mainland and strengthening the offshore renminbi business.