Board Capital,Institutional Characteristics And Corporate Financial Decisions

Since the Reform and Opening up,China's economy has made remarkable achievements after more than 40 years of development.Behind these achievements are the great differences between China's institutional system and that of the western developed countries.Faced with the contradiction between reality and theory,western scholars put forward the term of “the Mystery of China's Economic Growth”.Scholars from China and western countries have made in-depth conjectures and tests of this “mystery” based on various theories,among which the Neoinstitutional Economics is the most influential.However,the institutional system can only play its role through the economic subject in the market.Therefore,in order to really unravel the veil of China's economic development and understand how the system affects the society and economy,we need to focus on micro-level enterprises,especially the highest governing body of an enterprise--the board of directors.However,the traditional research on boards tends to focus on the local characteristics of boards or directors,while ignoring the overall image of the boards.Based on agency theory and resource dependence theory,Board Capital can effectively avoid the above problems by investigating the supervisory functions and resource provision functions of the boards.Therefore,from the perspective of Board Capital,combined with the unique institutional background of China,this thesis constructs a complete logical framework to further study the relationship between Board Capital,institutional characteristics and corporate financial decisions.This thesis defines financial decision as financing decisions,operational capital decisions and investment decisions.Specifically,financing decisions include debt financing decisions represented by bank loans and bonds.Equity financing decisions represented by equity refinancing.Operating capital decisions mainly choose cash holding decisions.Investment decisions include capital investment decisions and R&D expenditure decisions.Based on this,this thesis chooses Shanghai and Shenzhen A-share non-financial companies from 2006 to 2017 as analysis samples,examines the relationships between Board Capital,including Education Capital,Experience Capital,Social Capital and comprehensive indicators,and enterprise financial decisions,and studies the impact of relevant institutional characteristics on the above relationship.At the same time,this thesis also studies the specificmechanism and economic consequences of the relationships above.The main research contents and conclusions are as follows:Firstly,this thesis finds that there is a significant positive correlation between board capital and cash holdings of listed companies.The empirical results of interaction items support the agency cost hypothesis that board capital affects cash holdings,but no evidence is found to support the environmental uncertainty hypothesis.That is to say,the main reason for this positive correlation is that the boards has fully exerted its supervisory function and alleviated the agency problems caused by excessive cash holding.In the case of financing constraints and information asymmetry,companies are more likely to choose internal financing methods,thus increasing the level of cash holdings.Further evidence also shows that compared with SOE,the cash holdings of private enterprises is more sensitive to the Board Capital,and the role of the boards in restraining agency problems is more significant in private enterprises.The main ways for the boards to reduce agency costs are to improve the level of information disclosure,strengthen equity incentives for senior managers,and improve the accounting conservatism of companies.The study on economics consequence also finds that the increase of Board Capital rise of the market value of cash.The above evidence supports the agency cost hypothesis of Board Capital.The conclusion of this thesis is robust after considering the endogenous problem and other robustness tests.Secondly,this thesis finds that Board Capital can significantly improve the level of capital expenditure of listed companies.When investment opportunities are weak,higher Board Capital can enhance the sensitivity between investment opportunities and capital investment.This means that in the face of different investment opportunities,the effect of Board Capital on corporate investment is different.Considering the nature of property rights,we find that this relationship varies with the nature of property rights of listed companies.The relationship between Board Capital and capital investment in non-SOE is more significant,and the sensitivity to investment opportunities is also significantly improved.The main way to achieve these impacts is to ease the financing constraints of enterprises and tap the policy-oriented industrial development trend.Further research finds that the Board Capital can improve the efficiency of capital investment and investment opportunities,effectively alleviate the underinvestment of listed companies,but has no significant effect on restraining overinvestment.Thirdly,his thesis finds that the relationship between Board Capital and enterprise R&D will be significantly affected by product market competition.This effect is that,with the decline of product market competition,the positive relationship between Board Capital and R&D would be significantly strengthened.The research on its internal mechanism shows that in the early and medium stages of product market competition which is fierce,companies with higher Board Capital are more able to provide resource support for R&D by easing financing constraints.In the later stage of product market competition,the role of Board Capital is to promote the increase of R&D by strengthening equity incentives of listed companies,coordinating the long-term interests of shareholders and short-term performance pressure of executives.Further analysis also finds that when the factor market and product market of listed companies are developing slowly,the level of product market competition is lower,and the relationship between Board Capital and enterprise R&D is more significant.Fourthly,tthis thesis empirically examines how Board Social Capital can improve the financing situation of enterprises and increase the scale of bank loan of enterprises.The research finds that the Board Social Capital can effectively enhance the scale of bank loans of listed companies,and slightly reduce the cost of loan financing,thereby improving the financing situation of enterprises.By incorporating institutional factors into the analysis,this thesis also finds that the Board Social Capital has a more significant impact on external financing for enterprises in areas with lower financial marketization.While for enterprises with on industrial policy support,the ability of the boards to promote external financing is restrained.Furthermore,this thesis examines the subsequent impact of Board Social Capital on external financing,and finds that Board Social Capital significantly improves the financing efficiency of listed companies.In addition,the study also shows that directors' political connections,industry organization leadership experience and the number of directorship in other companies are the main ways for Board Social Capital to play its role.Generally,although the effect of Board Capital on corporate financial decisions are not "fully covered",it still effect a wide range and has a positive impact.Although the Board Capital combines both the supervision functions and resource provision,the two functions play different roles in influencing the financial decisions.The impact of Board Capital on corporate financial decisions are notmutually fragmented.Meanwhile,institutional characteristics are not always conducive to the development of enterprises.But when examining the decision makers of enterprises,from the perspective of the Board of Capital,it will be found that enterprises would try their best to adapt to the institutional environment,promote the progress and development of enterprises,and show a strong viability.This study also provides some evidence for answering the "Mystery of China's Economic Growth" to a certain extent.This thesis has some enlightenment on the scientific selection of directors of SOE and the full mobilization of the enthusiasm of enterprise decision-makers.It is helpful for enterprises to optimize the composition of their own boards,understand the characteristics of the institutional environment,and enhance the adaptability of the institutional environment.