The Empirical Study On The Supervision Mechanism In The Corporate Governance Of China's Listed Companies

The separation of ownership and control is an important feature of the modernstock company. Because of the targets' difference between the owner and the managerand the information dissymmetry, the manager is likely to do something to damagethe benefits of the owner. This is the so-called principal-agent problem. In order toprotect the interests of shareholders, it is necessary to supervise the agents' behavior.The corporate govemance mechanism is mainly aimed to resolve theprincipal-agent problem. It protects the benefits of the owner by means of supervisethe manager's behavior. There are numerous explanations of the corporategovernance, but in nature it is a mechanism of supervising the manager.On the whole, there are two kinds of models on the corporate governance. One isthe outer supervising model, and the representative nations are the USA and the UK.The other is the inner- supervising model, especially in Germany and in Japan.The structure of company in the outside supervising model adopts theunilateral-pattern system under British and American legal system. That is to say, therights of decision-making and supervision are performed by the board of directorsunder the board of shareholders. However, the inner supervising model adopts thebilateral-pattern system under civil law system. The civil law system sets up the boardof supervisors, combining with the board of directors, to improve the corporategovernance. The right of supervision belongs to the board of supervisors and theboard of directors has the right of decision-making. Generally speaking, the maindifference between the outer supervising model and the inner supervising model isthat whether there is a special supervision organization or not.The stocks' dispersive of the UK and the USA brings about the problem ofinsider control, and it badly damages the benefits of shareholders. In order to solvesuch a problem, they introduce the independent director system. The system hasgreatly improved their corporate governance mechanisms, and enhanced the profits oftheir enterprises.The model of China's corporate governance belongs to the outer supervisingmodel in nature. But the truth is that the board of supervisors failed to achieve itstarget to supervise the manager, and the supervising authorities unable to find effective ways to change this situation. In view of its high efficiency in USA, Chinaintroduces the independent director system to improve its corporate governance andstrengthen the supervision in the inner of corporations.Because of the inefficiency of its board of supervisors, China has introduced theindependent director system. As a result, it forms the situation that the board ofsupervisors coexists with the independent director system. The relation between themand their effects on improving the corporate governance have been debated fiercelyby scholars. They do their empirical researches on above-mentioned problems fromdifferent aspects. But the empirical researches on the board of supervisors are notenough.This paper takes the enterprises, belong to the industry of consumables definedby the Shanghai Stock Exchange, as researching object. The author makes use of theSPSS to process the data, collected by the author based on the annual reports oflisted companies, by way of multiple linear regression analysis. The purpose of theempirical research is to show the relationship between corporate performance and theboard of supervisors as well as the independent director system. The result is that theindependent director system has a negative influence on listed companies'performance and the board of supervisors hardly had any effect on it.This paper is organized as below. The first chapter deals with the theories ofcorporate governance. It briefly introduces the concept of corporate governance, anddiscusses the positive effect of corporate governance on the resolution of theprincipal-agent problem. It discusses the features and differences of corporategovernance, under British and American legal system and under civil law system, andcomments on China's supervision mechanism of corporate governance. The secondchapter mainly focuses on the supervision mechanism of corporate governance, andmostly discusses the correlative empirical researches. Especially, it mainly discussesthe empirical researches on independent director system. It also covers the empiricalresearches on board of supervisors. The third part is this paper's main body. Itpresents the outcome of the author's empirical researches by means of collecting thedata of listed companies, and making use of the SPSS software to process the data bythe multiple linear regression analysis. Finally, this paper gives a brief comment onChina's board of supervisors and its independent director system. It points out that there is no difference on protecting the benefits of shareholders. In order to improvethe corporate governance mechanism, it is no use setting up a merely supervisioninstitution without taking practical actions. The key factor in improving corporategovernance is the implementation rather than the system itself.