An Empirical Study On Board Governance Of Chinese Listed Companies From Endogeneous Prospective

In western countries, the board of directors has always been the core issue of corporate governance. Particularly Enron, WorldCom, and other well-known corporate governance scandals are exposed, which aroused western scholars'in-depth study of the board of directors. In China, the board of directors, as a new governance mechanism, is increasingly concerned by the academia and the business community. By a comprehensive analysis of existing board governance theory and empirical researches, this paper identified two major issues to a large extent hindered the progress of study of the board of directors: First, there are still big differences on the nature of the board of directors. Scholars have developed many theories, such as principal-agent theory, game theory, resource dependency theory, stewardship theory and so on. The above theories answered on the side of the nature of the board of directors, but no one can fully explain the whole work of the board of directors. Second, the existing empirical researches mainly concern of the direct impact of the characteristics of the board of directors on corporate performance, and ignore the endogenous and reverse causality. So there are big differences of this conclusion of the studies, and the majority of scholars are very confused to interpret the empirical results.Therefore, this paper, from the endogenous perspective, does an empirical research on the Chinese listed companies. This study consists of two parts: first, the relationship of the board size and corporate performance; second, the relationship of the board actions and corporate performance. Our empirical results indicate that endogenous problems are important factor that impact empirical study of the board of directors. Existing literature often prior assume that the variables are exogenous, but, in practice, most of the variables are endogenous. So the conclusions of the study plunge into an embarrassing predicament. This paper shows that estimating a system of equations is more realistic, which can avoid the dilemma that least squares estimation facing, and contribute to the understanding of board governance.