Small Board Listed Company Internal Governance, Its Performance Impact

SME board develops rapidly after its establishment.The number of the SME board listed companies has increased from the original 8 to 273 during the past 5 years.The main function of the SME board is to provide a financing place for the SME which operate well and have higher growth. Usually, these companies belong to the High-tech industry. Therefore, it is praised as the "NASDAQ" in China. With the increasing influence of SME board, investors and regulators pay more and more attention on the internal governance of the SME board listed companies.So,without any doubt, we can say it has higher theoretical value and can provide a practical guide to study on them.With this background, we choose the three year's data of the SME board listed companies as our sample. Then, using the correlation analysis and regression analysis (GLS),we study the relationship between the internal governance mechanism and their performance for the listed companies in the board of SME, in order to find ways to perfect the internal governance mechanism and to enhance the company's performance.The following is what we found in our study.(1) There is no significant relationship between the largest shareholder's share and the company's performance while the 2nd to 5th shareholders'concentration has a significant positive effect on the company's performance.(2)There is an significant inverse relation between the company's performance and two factors (the board size and the CEO duality).There are no relationship between the frequency of meeting and the company's performance.(3)The compensation of the highest level managers have a significant positive effect on the company's performance.(4) The ratio of independent directors has a significant negative effect on the company's performance while the ratio of the inside directors has a significant positive effect on the company's performance, which is different from the existed study before.Finally, based on the conclusion,we provide three measures to perfect the internal governance mechanism for the SME board listed companies:(1)the ownership structure should be optimized and the Equity Restriction should be increased; (2) the board function needs to be strengthened and the efficiency of decision making and supervision needs to be improved; (3)the compensation structure of the highest level manager should be riched, just like the introduction of long-term incentive mechanis. Ultimately, all these are done to enhance the company's performance.