The Effect Of Board Capital On Corporate Governance

The board of directors is taking centre stage in the corporate governance. Precious studies have found that boards with the same or similar structure and mechanism have different results in corporate governance decision. Borrowing from former researches, this paper uses "Board Capital" to value the resource of the board of directors. Building upon agency theory and resource dependence theory, I divide board capital into the heterogeneity and embeddedness. The heterogeneity of board capital includes three aspects:function, occupation and part-time job of directors. And the embeddedness of board capital consists of three indicators:directors’ past jobs, outside directors’ own jobs and outside directors’ part-time jobs in companies’ industry. In addition, this paper also investigates the effects of micro and macro factors between board capital and corporate governance, such as CEO power, equity concentration, property rights and institutional environment. Through above analysis, I also establish the research model.After analyses, this study reaches conclusions as follows:Firstly, the heterogeneity of board capital leads to better corporate governance. Secondly, the embeddedness of board capital has adverse effects on corporate governance, but the result is non-significant. Thirdly, CEO power and equity concentration significantly weaken the positive effect of the heterogeneity of board capital and outside directors’ part-time jobs of companies’ industry on corporate governance. Fourthly, the heterogeneity and embeddedness of board capital have differences in property rights. Finally, the heterogeneity and embeddedness of board capital have different effect on corporate governance in different institutional environment.The mainly value and innovation as follow:First of all, using corporate governance as the explanatory variable, this paper studies the contributions of board capital. Different from previous researches, I believe board capital did not affect strategy and performance directly and in time. It can improve companies’ strategy and performance in the long-time through corporate governance decision. Therefore, it is necessary to find out the mechanism of board capital on corporate governance. Moreover, this paper establishes the research model. Model discloses the inherent mechanism of board capital acting on corporate governance and constraint mechanism of micro and macro variables. Last but not least, this paper reasons the governance path of board capital and makes some proposals, hoping to help companies in listed use board capital rationally and improve corporate governance.