| "Yuan(?)" is an important part of Chinese traditional culture,it not only laid the foundation of the Chinese intimate relationships,but also profoundly affects the principle of interpersonal interaction,it plays an important role in corporate governance as a kind of informal institutional.Among them,"hometown complex" is widespread in managers of Chinese listed company.According to the hand collected id information of Chairmen and general managers in Chinese listed companies over the 2004-2014 period,I find that there is about 47%of the firm-year observations that the chairman and general manager belong to the same county,and about 61%share the same branch of sub-dialect.Existing research discuss a lot about hometown complex and agency problems.However,so far,academic have not systematically studied the economic consequence,and the conclusion is still unified.As the foundation of utility of regional network is also the way people get along with.I choose interpersonal principles as a point cut,study the influence of relationship between the chairman and general manager on explicit and implicit agency problem in the framework of relational contracts.The main conclusions of my paper are as follows:firstly,the geo-relation between Chairman and general manager significantly reduced the company's financial fraud,and this effect is strengthened as to narrowing the scope of home.At the same time,off-site work also have the same effect.The results show that the geo-relation between Chairman and general manager has positive influence on explicit agency problem.This study also differentiates firms located in provinces with high MKT indexes from those located in provinces with low MKT indexes,and then conducts subsample tests.The results show that positive influence on explicit agency problem only stands for the subsample with MKT indexes.Secondly,the geo-relation between Chairman and general manager significantly reduced the company's cash holdings levels,narrowing the scope of home and off-site work can strengthen this effect.The results again prove that the geo-relation between Chairman and general manager has positive influence on explicit agency problem.But this effect only stands for the subsample with law legal environment.Thirdly,the geo-relation between Chairman and general manager significantly reduce the risk-taking of the company(Earnings volatility or R&D Investment).It suggests that the geo-relation between Chairman and general manager has negative effects to the implicit agency problem.But the negative effect of the geo-relation on the risk-taking is only valid for non-SOEs,but not for SOEs.These indicate that the policy burdens,supervision and incentive mechanism of state-owned company will weaken the effectiveness of the hometown complex between Chairman and CEO.This paper verifies the effects of the geo-relation between Chairman and general manager in aspects of financial fraud,corporate cash holdings,and risk-taking(Earnings volatility and R&D Investment).This paper also provides further empirical evidence for the economic consequences of the geo-relation between Chairman and general manager.The study find that the impact of the hometown complex on corporate governance has two sides,the positive side and the negative side.These conclusions will be helpful for listed companies' staffing governance improving and decision-making,etc.The study's potential theoretical contributions are:firstly,According to the two kinds of measurement methods of the hometown complex-the formal administrative division and the informal sub-dialect,this paper studies the governance role of the geo-relation between Chairman and general manager based on a more broad perspective;Secondly,I distinguish the type of agency problems,find that the geo-relation between Chairman and general manager has positive governance effects on explicit agency problem,and negative effects on implicit agency problem;Thirdly,this paper provides a new perspective for explaining financial fraud,corporate cash holdings,and risk-taking. |
PDF Full Text Request