The Effects Of Internal Managers Of Business Group On Corporate Performance,investment And Financing

Business groups are a common form of corporate organization,prevailing in emerging markets such as China and India.This paper studies the influence of the managers'(including the general manager and the chairman of the board)background characteristics on companies' performance,over-investment,financing choices and debt costs.The sample companies are listed ones,affiliated with one business group.The managers' background characteristics refer in particular to their experience in the business group.Further,based on the results obtained,it is analyzed whether the business group has a good internal labor market,that is,whether the company within the group has cultivated its labor force and provided a talent flow channel.The sample used for this study is the listed companies of the Shanghai and Shenzhen A shares main board and the small and medium-sized board,ranging from1994 to 2015.The companies belong to a business group and are not in the financial insurance industry.The data related to the companies come from the Guotaian CSMAR Economic and Financial Database.The data relating to the managers(general manager and chairman of the board),except for some from the Guotaian CSMAR Economic and Financial Database,are unique data,manually collected from Sina Finance,Phoenix Finance and other websitesEmpirical results show that when the general manager or the chairman of a company comes from within the business group,which the company belongs to,it will influence the company's operating performance,over-investment behavior,and financing behavior.First,when managers come from within the business group,it helps to improve the performance of the company.This result is not affected by the nature of the company's property rights(state-owned or non-state-owned enterprises),whether the company's performance is in the current year or in the next year,and whether the first record of each manager is removed.However,as the time for managers to join the business group increases,managers have a negative impact on company performance.In this aspect,general manager and the chairman are heterogeneous.Second,when managers come from within the business group to which the company belongs,the company's over-investment behavior decreases.However,as the time for managers to join the business group increases,managers' investment decisions become radical and the company's over-investment behavior begins to increase.The company's over-investment behavior in the coming year is similarly affected.Among companies with different property rights,there are differences in the inhibitory effect of the general manager and the chairman on the over-investment behavior of the company.In addition,whether the manager comes from within the business group towhich the company belongs does not affect the normal investment level of the company.Third,when managers come from within the company group to which the company belongs,they reduce the company's leverage ratio,bank borrowings,and short-term borrowings,but at the same time increase the company's debt cost rate and interest-bearing debt cost rate.The effect of the working hours of the general manager or the chairman in the business group on company's financing and debt costs is different in aspect of the term structure features.Fourth,according to the results from the influence of the internal managers of the business group on the company's operating performance and over-investment behavior,the business group is likely to form a good internal labor market.In this internal labor market,companies within the business group have trained relevant professionals such as managers.When these professional and technical personnel serve in the subsidiaries of the business group,they may serve the company and the affiliated groups better than the outsiders,maximizing the interests and values of the company and the group.However,according to the results of managers' influence on company financing choices and debt costs,the internal labor market of the business group may also have certain flaws,which cannot completely replace the role of the labor market outside the business group.