Empirical Research On The Correlation Of The Board Characters And Financial Distress

In the market economy conditions, there will always be a number of enterprises from the birth, development to the prosperity; also inevitably there will be some companies out of business. In the context of the financial crisis, the possibility that a company fall in financial crisis has greatly increased. Business failure or even bankruptcy, largely originates from financial failure, the examples that financial crisis had led to struggling until bankruptcy happened more than once. As the core of the corporate governance, board of directors is not only the platform to monitor the operators on behalf of the shareholders, but also the hinge to connect investors and operators. If enterprises find themselves in financial crisis, the board should be held ultimately responsible. This thesis will link the board characteristics and financial crisis, through theoretical analysis and empirical analysis to explain how board characteristics influence financial crisis, whether there is correlation with those two subjects, and help the government formulate policies.Through a review of previous documents, the author found some deficiencies in previous studies: First, there are some differences of opinion between the post of chairman and general manager. Secondly, of the board incentives, the previous studies are relatively concentrated in equity-based incentives (e.g. shareholding of directors), but to the board's salary incentives, research is not very much. Third, previous empirical researches are relatively perfect in the model, empirical method and selection of variables, but rare for the derivation of the theoretical analysis. This thesis hopes that through further research in this area makes up for some shortcomings left behind by previous studies.First, this thesis analyses and compares the study by home and abroad researchers in a different way, proposed to use special treatment (ST) as the definition of financial crisis. Then analyses the direct causes and indirect causes of financial crisis, and pointed out that the most important internal factors is the board governance. Further researches focused on the mechanism of the impact of board characteristics on financial crisis.This thesis selected 129 ST A-share companies from 2006 to 2008, and selected 129 normal companies by a 1:1 ratio according to certain matching criteria. Though correlation analysis found that among the explanatory variables there was no serious multicollinearity; through descriptive statistics, paired samples T test and Logistic regression, reached the following conclusions: board size, board meetings have a significant positive correlation with the probability of financial crisis; the proportion of independent directors, board salaries have a significant negative correlation with the probability of financial crisis; the dual of chairman and CEO, director shareholding ratio have no obvious correlation with financial crisis. This thesis argues that the board may maintain a reasonable scale, increase the proportion of independent directors appropriately, raise the salaries of directors appropriately; optimize the salary structure of directors and establish a scientific evaluation mechanism. This would help to increase the performance of the company and reduce the probability of financial crisis.