Empirical Study On Characteristics Of Directorate And Growth Ability Of Listed Companies In China

Since the Reform and Opening-up in China,it has been over 10 years for the development of the financial market,then till now there are over 1400 listed companies. Although these companies have shown great development in both size and quality,they are still far behind those in developed countries. At the same time,some listed companies which used to play a leading role in their industry,have become ST,PT companies. But we still find some were even forced to quit the market. Up to July 21 2006,there have been 36 listed companies which quitted since Shuixian became the first one. Meanwhile,the number of the ST companies has increased by 59. Why are there so many shooting-star companies in our country?Why they could not keep stable,healthy and sustainable growth?This paper considers that the distempered corporate governance is the decisive reason for the existence of them. Because of the limited length,we only focus on the characteristics of the directorate. But there is little existing literature which combines the growth ability with corporate governance,so this paper is expected to fill the gap.This paper begins with the review on the existing literature. One is about the classification of the growth ability,including the gross classification with one financial index,TobinQ method,Clustering Analysis,Factor Analysis,Discriminant Analysis and so on. The other part is about research on the characteristics of the directorate,the size of the board,the outside director proportion and whether the chairman of the board and the manger is the same person included.Growth ability classification of listed companies in our country comes next. It is the most controversial problem to divide the growth ability. It is difficult to choose between financial and non-financial indexes,between the single index and the composite index, also between the various methods。This paper has its own method. Based on the financial data form 2000 to 2004, we choose the increase on asset,net asset,long-term asset,operation revenues,operation profit and net profit as the growth measurement and of course they are standardized at first. Principal Component Analysis is used to get a Growth Factor and the factor scores are calculated,which is the basis of ranking the listed companies. Companies whose growth factor scores are below the median in every year from 2000 to 2004 is labeled as High-growth company, and companies whose growth factor scores are above the median in every year from 2000 to 2004 is labeled as Low-growth company.Based on the three assumptions including the size of the Board,the outside directors proportion and whether the chairman of the board and the manger is the same person,Binary Logistic Model is used to examine the influence of ownership structure and board of directors on firm growth dummy,controlling size, industry, the leverage and so on. The results show that as for the board of directors:(1)Size of the board has a significantly positive relation with firm growth;(2)whether the chairman of the board and the manger is the same person is passively related with firm growth but not significant;(3)outside director proportion is passively related with firm growth but not significant.In order to be more robust,Tobin Q,TobinQ₂0,TobinQ₃0 is used in the multi linear-regression model to examine the influence of characteristics of directorate on firm growth,controlling size,industry,the leverage and so on. Besides,a variety of tests are conducted considering industry,outside directors and other factors. The results are consistent with the Binary Logistic Models.Part 5 summarizes the conclusion of the empirical study and brings up the related suggestions. Research limitation and future research fields are proposed as well.It shows that favorable characteristics of directorate are an important factor which will enhance the competitive power of the firm and keep its sustainable growth.