Research On Effect Of Enterprises External Environment And Active Degree Of Supervisory Boards Setting On Executives' Private Benefits

In recent years,the phenomena of executives' sky-high salaries,huge incumbency consumption,“group corruption” case and so on are common in the media press,causing the public's widespread concern and worry about the executives' income chaos.The essence of executives' income chaos is the executives' acquisition of excessive abnormal private interests,which deviates from its original intention as an incentive mechanism but has been eroding the interests of shareholders.therefore,the resulting consequence is a decline in company value and even the serious destruction of the efficiency of economic activities and social ethos.Hence,how to control and govern executives' improper acquisition of private income has become the focus of both theoretical and practical circles.Both the practical and the theoretical circles are committed to the mitigation and governance of this focus.Chinese government and regulatory authorities have issued a series of laws and regulations,as well as recommendations to regulate the behavior of the executives' power rent-seeking and manage executives' income disorder.Facing the worldwide important issue on the executives' seeking for their personal interests with power,scholars in the theoretical cycle have discussed the effect of the company level on executives' private benefits from aspects of political domain,economic exchange domain,social exchange domain and organization domain,etc.The executives' acquisition of private benefits is not only the economic consequence of corporate governance at micro level,but also the result of interdependence and interaction between internal and external environments of economy,politics,social culture and organization.However,there are few researches to explore the role of external environment of enterprise under the combination with the institutional background of China,and fewer researches on this topic from the coupling effect of internal and external factors.Then,under the background of China's transition economy,which can be more effective for the executives' power rent-seeking behavior,the endogenous environment or the exogenous environment? What are endogenous or exogenous formal rules and informal rules that affect the executives' acquisition of private income?Furthermore,it has been proposed by experts and scholars that the lack of internal supervision mechanism is the main source of executives' choice to seek for improper private interests.As an important component of the internal supervision mechanism in Chinese characteristic two-tier model governance system,Supervisory Boards holds the power to the company's executives for financial supervision and management supervision in accordance with the laws and the contracts.However,there is difference in supervisory role of Chinese Supervisory Boards Institution in the actual operation,and among few academic researches on Supervisory Boards,the effectiveness of supervision is also controversial.So,is Supervisory Boards of Chinese enterprise effective in the supervision of executives' power? Is there any difference in the supervisory function of the Supervisory Boards between different companies? Where does the difference come from?As a supervisory system necessarily established in listed companies,Supervisory Boards is not set up invariably based on the compliance with mandatory regulations of the formal institution,such as laws and regulations,and it is possible to lead to endogenous self-enforcement of the setting mechanism of Supervisory Boards for the displacement of external environment parameters and the strategic interaction of internal game participants.The academic circles have indirectly responded to this view through the exploratory researches on initiative corporate governance innovation activities and the positive effects of corporate governance practices of initiative innovation in western countries.However,few studies have explored whether introduced Supervisory Boards Institution has been integrated into China's differential background environment and the evolution of endogenous setting mechanism then has been presented in the operation processes of the path dependence and the interaction between law rules and practice,and there has been much fewer researches to comprehensively and systematically deduce the mechanism and the value of setting mechanism evolution of Supervisory Boards,as well as the supervisory effect of such on executives' acquisition of monetary or non-monetary private benefits.Based on existing researches,will the difference or any change of the legal environment,the government intervention,the product market competition and any other external environment of enterprise influencing corporate governance also affect the institutional evolution of Supervisory Boards? What effect will it have? Does the institutional evolution of Supervisory Boards improve governance quality of Supervisory Boards? Will the promotion of active degree of Supervisory Boards setting play a binding role on executives' acquisition of private income? The operation process of Transaction Cost Economics indicates that the displacement of macro environment parameters will not only lead to active coordination and adaptation of micro governance mechanism,but also have further direct or indirect effect on individual participants.With regard to external environment of enterprise in three dimensions of legal environment,government intervention and product market competition,whether it indirectly affects executives' private benefits via the function of intermediate medium of setting mechanism evolution to Supervisory Boards?In the process of China's transition economy,continuous improvement of external environment gives companies more space to implement self-discipline behavior,while uneven development of regional reform and difference in regional environment provide the background conditions to the research.In view of this,in order to answer above series of problems,the paper establish the research framework of “Enterprises External Environment – Setting Mechanism Evolution of Supervisory Boards – Executives' Private Benefits” through combing and concise of many literatures and integration of Comparative Institutional Analysis,Transaction Cost Economics and Agency Theory.This paper has selected 2006-2016 A-share listed companies as research samples for a comprehensive and systematic exploration on the influence of legal environment and government intervention environment in political domain and product market competition environment in economic exchange domain on executives' seeking for improper private benefits with power.Accordingly,the evolution mechanism of Supervisory Boards Institution is deduced and specified,and influence and its degree of any change or difference of extraterritorial game rules of organization domain on setting mechanism evolution of the Supervisory Boards are explored and analyzed.The value of setting mechanism evolution of Supervisory Boards is discussed,while the effect of active degree of Supervisory Boards setting on executives' private benefits is studied and analyzed.The effect path is discussed under cross level which is from the external environment at macroscopic level to the setting mechanism evolution of Supervisory Boards at microcosmic level and then to the executives' private benefits at individual level;That is,the mediating effect of active degree of Supervisory Boards setting acting as the intermediate media in the superincumbent effect path.The research has got following conclusions: firstly,enterprises external environment constrains executives to acquire monetary and non-monetary private benefits through the formal and informal rules.With the promotion of level of legislation and law enforcement,the legal environment becomes more reasonable and perfect,and the degree of information asymmetry decreases.The effective transfer of information,the timely feedback of price mechanism and the survival of the fittest in competition results all have been facilitated under the external market environment of fierce competition.The promotion of legal environment and product market competition increases executives' power rent-seeking risk and transaction cost,and makes action decision of executives' acquisition of private benefits more cautious,so as to constrain the executives' monetary and non-monetary private benefits.At the same time,the promotion of government intervention will weaken the protection effort of investors,reduce the executives' rent-seeking risk and lower the potential transaction cost as a result,relatively speaking,the net interest can be obtained relatively more,which thus leads to that the executives tend to slacken in behavior or use power of rent-seeking to seek private benefits.Secondly,the change of the displacement trajectory of the external environment parameters of the enterprise affects the endogenous evolution of setting mechanism of Supervisory Boards.Those enterprises actively adapting to environment will spontaneously adjust setting mechanism of Supervisory Boards based on the change of exogenous game rules,and sound and healthy environment will prompt endogenous evolution of setting mechanism of Supervisory Boards to form informal rules;therefore,it shows that active degree of Supervisory Boards scale setting is enhanced,and the setting level in independence and professional technical capability of members of Supervisory Boards is actively increased.However,because more perfect legal environment promotes supervision force of the externally formal rules,enterprises will tend to appropriately reduce active degree of Supervisory Boards scale setting.If the degree of government intervention is too high,the combined action of the help and the grabbing of the government to companies,especially those state-owned companies,through equity,capital and resources will have the reaction,and then enhance active degree of Supervisory Boards independence setting and active degree of Supervisory Boards technical ability setting.Thirdly,evolution of setting mechanism of Supervisory Boards has a positive effect.The situation where mandatory requirements of rigid system are only met and Supervisory Boards setting is passive could not meet the needs of the company's scale expansion,technology and resources endowment change,which not only increases transaction costs of implementation of Supervisory Boards Institution,also cannot fully control opportunistic behavior of executives;but self-implementation of setting mechanism of Supervisory Boards within the scope of existing institution rules can improve effectiveness of supervision.Then,restraint potency of Supervisory Boards Institution is increased by increasing active degree of Supervisory Boards scale setting,active degree of Supervisory Boards independence setting,active degree of Supervisory Boards technical ability setting,so as to effectively inhibit deviant behaviors of executives' acquisition of monetary and non-monetary private benefits.Fourthly,enterprises external legal environment,government intervention environment and product market competition environment all not only affect the direct path of executives' monetary and non-monetary private benefits,but also make companies actively set the corresponding Supervisory Boards and adjust the scale,independence and technical ability of Supervisory Boards through any change of formal rules or informal rules of the external environment of enterprises,so as to form the change of transaction cost based on rules,indirectly affect the behavior of executives' acquisition of private benefits.Then realize intermediary conduction effect of active degree of Supervisory Boards setting played between enterprises external environment and executives' monetary private benefits or non-monetary private benefits.Focusing on the intrinsic function mechanism among enterprises external environment and active degree of Supervisory Boards setting and executives' private benefits,this paper has made in-depth research,and the innovation and extension of existing literature on performance may be as follows: firstly,selecting cross-level data,exploring influence of enterprises external environment on executives' private benefits from visual threshold of Transaction Cost Economics,and clearly revealing differential operation path and mechanism under which the macroscopic enterprises external environment in three dimensions of legal environment,government intervention and product market competition acts on individual-level(executives')power rent-seeking behavior;all are usefully supplement to related problem research.Secondly,exploring internal mechanism of setting mechanism evolution of Supervisory Boards according to thinking of Comparative Institutional Analysis,and verifying influence of external environment on endogenous self-implementation and degree of Supervisory Boards.Trying to interpret effect mechanism of Supervisory Boards Institution and active degree of setting on executives' monetary and non-monetary private benefits based on comprehensive use of Agent Theory and Transaction Cost Economics,and conducting empirical test.Responding to practical activities of innovation of setting mechanism of Supervisory Boards from theoretical level,further extending research field of Supervisory Boards,and making analysis on the supervision function and effectiveness of the Supervisory Boards with a new perspective,so as to provide reasonable explanation for difference in the present research conclusions.Thirdly,taking the hierarchical framework of operation of Transaction Cost Economics as theoretical support and integrating three levels to construct the research framework of “Enterprises External Environment – Setting Mechanism Evolution of Supervisory Boards – Executives' Private Benefits”.Comprehensively using causal steps,difference inspection method and Sobel coefficient product inspection method of the mediation test to theoretically analyze and empirically test whether scale,independence and technical ability setting active degree of the Supervisory Boards are intermediary conduction media with indirect acting paths between enterprises external environment and executives' monetary private benefits or non-monetary private benefits,so as to comprehensively and systematically analyze internal relation among enterprises external environment,active degree of Supervisory Boards setting and executives' private benefits,expand the thinking of relevant research in this field and enrich application of Transaction Cost Economics in micro governance mechanism.