Research On The Relationship Between Corporate Governance And Financial Capability

As a profit-oriented organization, every company want to survive for a long time. Chinese listed companies can survive in the fierce market competition by improving the core competence. As an important part of the company core competence, financial capability is very important for the sustainable development of companies. Only with a strong financial capability as a backup, the company can develop steadily. Financial capability is connected with the future value of the company closely. Whether the companies have a good financial capability has become one of the factors for evaluating the value of the company. At the same time corporate governance has become the important issues during the process of optimizing the internal management mechanism.corporate governance is the key to help the companies steadily grow.in accordance with "Company Law" and "Securities Act", Company should be required to establish the scientific corporate governance. Especially through establishing the board, shareholders can supervise the company's managers effectively.Do the corporate governance affect the company's financial capacity? This research focuses on the relationship between the corporate governance and the financial capacity. First, it reviews the academic research about the corporate governance and the finance capability, and analyses the main theories on corporate governance and financial capacity. Second, it uses principal component analysis method to establish a comprehensive evaluative model, and analyses the listed real estate company's the four aspects of financial capacity (profitability, operational capacity, solvency and growth capacity) quantitatively. Third, through controlling the factors such as size of assets, it establishes the Multiple linear regression model from the three part of corporate governance (the equity characteristics, board composition and Incentives of managers). Empirical results show that Good corporate governance is one of the key factors which can enhance the financial capacity. Finally, based on the empirical results, it points out the limitations of this study, research prospects and some relevant recommendations.