Research On Manager's Behaviors Of Chinese Listed Companies

The evaluation on and justification for the managers' behaviors are the hotly debated topics in the science of management as well as economics. Among many attempts to address these two issues, agency theory and stewardship theory remain two of the prevalent theories at present. Indeed, agency theory, as the orthodox theory to explain managers' behavior, remains to be further examined especially on the assumption of economic person. The solution drawn from this theory is yet to achieve the desired goal. While stewardship theory, on the assumption of social person, concludes that due to managers' beliefs, desire for self-recognition and preservation of their dignity, they endeavor to become the stewards of the company and runs companies in the best interests of share holders which also coincides to be their best interests. However, these two dominant yet opposite theories are both supported by theoretical and empirical evidence.It is argued in this paper that the conflict between these two theories can be explained by the different research approaches applied by the science of economics and management. In the science of economics, managers have been deemed as individuals with insightful and perceptive nature to tackle problems and issues from daily business dealings, but their different individuality has been ignored by the science of economics, thereby their unique need for recognition and self-realization has been denied as well. While management science focuses on unique characteristics and social needs of modern human resource capital--managers. Moreover, contemporary psychology also suggests that one can equally be a selfish agent as well as an altruistic steward. Managers in the corporate environment are economic persons as well as social persons. The interest of managers is partly conflict with and partly consistent with that of share holders.This paper examines and evaluates the strengths and weaknesses of agency theory and stewardship theory on the study of managers' behaviors. The study shows that agency theory based on the worst assumption of economic person might prevent the worst ramification from poor management but could not encourage managers to produce the best performance, while stewardship theory based on the best assumption of social person might produce the best results but could not prevent the high cost of system failures. Only the corporate governance based on the suitable person assumptions could help managers choose the best behaviors on the behalf of corporate and share holders instead of themselves alone.Based on the analysis of the managers' unique demands and motives, this paper proposed that managers should be the beneficiary person whose benefit is the combination of managers' own benefit and other's benefit, economic benefit and non-economic benefit, short-term benefit and long-term benefit. Each manager possesses the characteristics of both economic person and social person. The share of each characteristic varies among different managers and this different combination would therefore produce distinctive motives among which conflicts might exist. Managers make their rational choice of behaviors according to different motive conflicts and different surroundings.With the assistance of game theory, an alternative theory with combined characteristics of described individuals from both theories has therefore been proposed based on the assumption of beneficiary person. The proposed theory suggests that two considerations should be examined in explaining managers' behaviors. One is the sense of self-fulfillment such as sense of achievement, fear and guilt for pursing their own interests. The other one is external factors such as corporate governance policy, remuneration package; the gain and expenses at which managers pursue their own interests and the scale of punishment once caught for doing so. Based on these assumptions, a model in an attempt to explain the complexity of managers' behaviors has been provided with various contributing factors such as demands of economic person and social person, motivation conflict, rational choice, managers' psychological condition, the external organizational structure, and the feedback on managers' behaviors. All this reveals the inter-link between managers' behaviors and corporate governance policy.In the light of the complexity and diversity of managers' behavior, this paper choose only those typical behaviors which can be compared by both theories to test such as financial risk management, company investment, and decision on management remuneration package.Subsequently, assumptions and factors of the proposed model of managers from publicly listed Chinese manufacturers under Chinese corporate policy and law have been carefully tested and verified through assistance of statistics. Data applied and tested have been provided by CNINFO website, He Xun website as well as CSMAR database developed by Hong Kong University of Technology and the company of Guo Taian, supplemented by data from chosen companies' annual publications from previous years. Furthermore, examined companies have been chosen from the Chinese manufacturers publicly listed on stock A market in Shanghai and Shenzhen stock exchanges. It has been concluded that with regards to financial risk management, company investment, and management remuneration package, CEOs' decision making practices from the chosen Chinese manufacturers cannot be entirely explained by any single theory while each theory would complement each other in explaining decision making process of managers at the chosen companies.Based on the analysis of systematic statistics data, this paper concludes that the solutions drawn from agency theory, such as enhancing the independence of the board, separation of chairman of the board from CEO, introduction of external board members, option of company shares as an incentive, which have been regarded as the panacea for the corporate governance among Chinese companies, cannot achieve the desired goal. Instead, CEO duality, encouragement of internal or related board members function and discourage of material incentive have been verified and supported by both theoretical and empirical evidence. Therefore, only the solutions based on the combination of agency theory and stewardship theory are appropriate to Chinese companies.This paper differs from the other contemporary works in the view of agency theory and stewardship theory in the following three aspects:First, in an attempt to adjust the model suggested in this paper, science of management, economics, psychology and sociology has been applied and a new assumption of beneficiary person has been proposed in revision of previous assumptions. A new more sophisticated model to explain managers' behaviors based on the new assumption of beneficiary person has been suggested. The assumption as to whether the CEO would deviate from pursuing the best interests of share holders is not a question which requires answering in both traditional agency theory and stewardship theory. A new analytical mechanism for decision making process of managers has therefore been developed indicating that managers' decision making process would interact with the company policy.Second, the integration of agency and stewardship theory has been realized by examining managers' behaviors through game theory. This paper is not confined to agency theory alone and instead has carefully examined agency theory. Subsequently, it introduces the stewardship theory in an all-round manner. These two theories have been conducted by applying game theory to analyze the various psychological and organizational factors affecting CEO's decision making. This new approach would better explain problems arising from daily management. It's a rather complement to the current dominant one theory practice to approach this issue by integrating the two conflicting theories.Third, this paper draw its conclusion based on analysis of systematic statistics data from publicly listed companies in a Chinese regulation environment. It is concluded that managers in China exhibit characteristics indicated in both agency theory and stewardship theory. Moreover, decision making behaviors on financial risk management, investment opportunity selection, and remuneration package for managers have been examined and analyzed using the software SPSS to prove that decision making behaviors would exhibit characteristics indicated in both agency theory and stewardship theory.