The Simulation Research Of Corporation Governance Based On System Dynamics

Since the separation of ownership and control rights of company,corporate governance has always been the focus of academic discussion andresearch of enterprise management.In2008,the international financial crisisstood for the information asymmetry,moral risk and internal control failure andother problems happened in corporate governance.The companies are in urgentneed of a more perfect corporate governance mechanism.And a strong corporategovernance structure will come to save the enterprises from the salary system’sdisarrangement and the lack of efficiency on board operation.At present,withthe rapid changes of global economic environment,the organization foreconomic cooperation and development,short for OECD,published two piecesof reports,which are the modification version on the original "OECD principlesof corporate governance”and“OECD governance guidelines for state-ownedEnterprises”.They strengthened the protection of minority shareholders and thecorporate governance parts on corporate social responsibility.In themeantime,they stressed the need to improve the transparency of corporategovernance,the high quality of enterprise information disclosure and theimportance of corporate accountability.Corporate governance is an evolvingprocess.In order to survive in the continuous intense world, the enterprises mustconstantly adjust corporate governance mechanism to adapt to newopportunities and fierce competition.Research on corporate governance aremostly used with the statistical method.Because of the differences in corporategovernance economic,social cultural,legal environment and the actualconditions of enterprises, the research results of corporate governance became quite different.And it was difficult to reach the same conclusion.Therefore,based on this background,this paper built corporate governancesystem dynamics mode with the methods of statistics and system dynamics.Andsimulation analysis is carried out according to the actual situation of singleenterprise.Firstly,on the reviews of the all kinds of research data and theorydiscussions related to corporate governance,the paper did the qualitativeanalysis on the research about corporate governance performance from threeaspects:board governance,information disclosure level and the incentivemechanism.At the same time,based on the theory of governance of board ofdirectors, the level of information disclosure and incentive mechanism,the paperdetermined that using the board of directors institution characteristics,population,human capital attribute and behavior of board characteristics tomeasure the board governance effect on corporate governance performance,using the Shenzhen exchange’s official website announced the"credit file"listing Corporation information disclosure evaluation index to indicate the levelof information disclosure and using the CEO shareholding rate,the salarysystem and reputation incentive to represent the effect of incentive mechanismon corporate governance analysis.Then by using SPSS tools,it was obtainedpreliminary equation on corporate governance influence factors based oncollecting the company governance data of300listing companies from2011to2013in Shenzhen stock market.And according to the system dynamics, thepaper established a corporate governance system model constructed by theboard of directors governance as the core,the level of information disclosureand incentive mechanism as the critical factors.By simulating this model with alisting corporation data(Foshan electric lighting Limited by Share Ltd)randomly chose from stock market,it concluded that the system model have abetter simulation effect compared with the real situation.Last but not least,the paper conducted a sensitivity analysis and reached some countermeasures andsuggestions on the corporate governance mechanism.The board governanceshould be maintain the core position clearly upon the independence,humancapital and meeting quality.The information disclosure mechanism should beconstructed and implemented under proper supervision from boardmembers,authorities and mass media.The incentive mechanism should bedesigned in the consideration of the long-term interests of enterprises and takeadvantage of more means of incentive mechanism,such as promotion andinsurance.This article has some imperfect parts, but there are still a lot of innovation.Firstly,by the use of system dynamics,the complex and changing corporategovernance were studied dynamically,providing a new thinking angle for thestudy of corporate governance.This paper not only conducts a research on thecorporate governance effect factors by the traditional statistical methods,andalso combines with the method of system dynamics,constructing a systemdynamics model of corporate governance.Meantime,based on the actual data ofa listing corporation,it is operated the simulation analysis of the modelperfectly.Therefore,there is a strong theoretical and practical significance on theresearch about corporate governance.Secondly,because of the difficulties of collecting some variables,theresearch on corporate governance cannot show the impact effect completely.Butin this paper,variable data which was hard to collect will be expressed as thelogical equations, which ensures the integrity of corporate governance research.