A Positive Research On Board Structure And Firm Performance

Management power of a corporation is typically centralized in a board of directors who establishes company and is elected by the stockholders. A good board structure reflects its efficiency of management in modern corporations. To increase efficiency in the management and the governance of a company, its structure is the main component. An unreasonable board structure causes disorder and inefficient board conduct, then leads to adverse performance of the board and the firm, especially the inefficient of resources configuration. Nowadays, there are many theory research achievements about board structure and firm performance in China and foreign countries. But there are lots of differences in positive research results about the relation between them. The reason is close to the purpose of research, the background of research and research methods. Based on this background of research, this paper choses the relationship of board structure and firm performance of listed companies in ZheJiang to research. In this paper, the courses of the positive research results are analysed and explained, combining with the unique environment of company governance in China with a view of providing empirical data and reference for the reform of company governance.This paper has four parts in all. Research background, ideas, method, and theory and practice significance of research are introduced in the first part of the paper.The second part is the part of theory research. First concepts about director and board are introduced; then two kinds of categories method of board structure are summaried; finally literature research of board structure and firm performance at home and abroad are summaried. The writer analyses the effect from function position of the board to firm performance, mainly from aspects of service function, control function and strategy function. The writer focuses on the theory analysis of the relationship between board structure and firm performance. The structure of the board includes scale of the board, constitution of the board, a overlapping status of board director with general manager, incentive systems, the specialized committees to set up. The effect from board scale to firm performance is uncertain in the theoretical circle. The writer thinks that should link the facts impacting board scale, such as the nature of the industry, diversified operation of the company, firm scale, CEO's preference and external pressure. Heated debate is existed in the theoretical circle about whether chairman and CEO should separate. These opinions are based on principal-agent theory, modern housekeeper theory and resources dependency theory. Theoretical research is generally believed that internal executive director, independent director and shareholders director have a positive role to firm performance. Incentive to directors is reflect shareholdings of directors. The more directors have, the better firm performance is. Theoretical research is also believed that special committees play an important role in board.The focus of this paper is the third part which is about positive research. In recent years, domestic scholars make a great effort to the research of board structure and firm performance, especially in positive research. Their conclusions are different because of the difference in sample chosen, data sources and processing method. The samples of this paper's positive research are the listed companies in ZheJiang. The paper puts forward the theories assumption and sets up the non-line model and square distance set with panel data, carrying on the empirical analysis. The paper discovers the positive relationship between board scale and firm performance; the state that the board director and CEO are separated haves a positive relationship with firm financial indicators ROS and ROA, but the positive relation between the state and firm indicators of economic value TQ and EVA is not obvious. The effects from the inner director's comparison, the independent director's comparison and the shareholder director's comparison to firm performance are not obvious; board incentive system has a weak effect to firm performance; the relation between the specialized committees and firm performance is not obvious too.The forth part is the conclusion of this paper. Policy recommendations are raised to improve the structure of the board in this part. The positive research finds the problem of board structure. This part concludes that environmental uncertainties, corporate strategy, previous company financial are three facts that effect board structure. The recommendations are about strengthening the board revision and perfection of the legal system problems, strengthening professional board of directors to the board of trustees of all-embracing change, strengthening the building of director market and professional, strengthening the building of the board culture and setting rational directors incentive system.