An Empirical Research On The Relationship Between Board Characters And The Performance Of Chinese Listed Companies

The board of directors is in charge of employing, monitoring and assessing top management and makes decisions on company's strategic development. Although the functions of the board vary in different countries, monitoring and advising top management are its two roles. According agency theory, monitoring role can help reduce the agency cost due to the conflict between shareholders and management. The advisory role helps top management to make more scientific decisions on firm's future development. Therefore, the board can influence the performance of the firm. This paper examines the relation between firm's performance and board features in order to offer useful advice for our listed companies to establish a suitable and effective board.Researchers have done intensive study on this topic, but prior literatures mainly focus on the public companies in west countries. As we all know, economic environment, law and culture are quite different in China, so it is necessary to do research on listed companies in China. Compare with west countries, home research is relatively weak in both depth and breadth. Usually, researchers in China like to borrow the methods used to study foreign markets and companies to analyze the case in china, which is not reasonable because of the different economic background between China and west countries. For example, Chinese Securities Regulatory Commission (CSRC) stipulates the proportion of the independent directors, and most listed companies just employ as many independent directors as CSRC requires. In this condition, it is absolutely wrong for firm's performance to directly regress with the proportion of independent directors. Therefore, considering China's actual conditions, this paper uses some innovative methods to design regression equations.For 837 listed firms over the 2003-2008 period, I find that the relation between ROE and board size is hump-shaped with the optimal board size at 9-10, firms with the proportion of independent directors lower than and equal to 1/3 have no significant difference with those above 1/3 in ROE, there is no significant correlation between ROE and duality, board meeting frequency is inversely related to the performance of former years and has no significant relation to the performance of later years, board ownership and ROE also have inversely U-shaped relation with the optimal board ownership at 30.08%, and the percentage of directors who don't get paid in the listed company has no significant relation to ROE. At last, the paper recommends several ideas to promote board reform and therefore improve firm's performance.