The Empirical Analysis Of The Indepentent Director And Company Performance On Chinese Listed Companies

The topic of corporate governance has been the focus of people's attention. Back in 1776, the founder of economics Adam Smith in his Wealth of Nations, raised the issue on corporate governance for the first time. It allows people to begin research on corporate governance. People always study on corporate governance for the purpose of increase efficiency. With the development of modern enterprises, the internal structure of the company is also changed when companies seek to improve their operational efficiency. In the modern company, the power is slowly transferred from shareholders to the hands of the board and managers. The purpose of the transfer of power is to enhance the overall efficiency of the operations and to meet the needs of economic development. As opposed to shareholders, the managers have more professional knowledge and practical experience in company management. They can better grasp the direction of the company forward. Therefore, today in the vast majority of companies, we see the actual charge of the company is the manager. They rely on their own strengths and skills to hold the great powers of the company. Although the company increased the overall efficiency by transferring the power, it also brings a lot of the problems. For example, the separation of ownership and management rights and the principal-agent problem. When managers have a great power, they are very likely to pursue their own interests on the coast of the interests of the company. These problems make the people reform the company's governance structure.In the Western modern corporate governance structure, they have been used the "one system" of corporate governance. In such a structure, The board is directly elected by shareholders but not setting up the board of supervisors. So the board has two functions, one is the decision-making functions, the other is oversight functions. It became the "one system" inherent defects in corporate governance. It makes the board of directors lack of independence. In China, most of the listed companies have reformed from the state-owned enterprise. These companies have been used a "dual system" model of corporate governance. The Board and the Supervisory Board exist in the corporate structure. The board is the decision-making responsibilities of management, and the responsibilities of the supervisory board are to oversight of company management. The supervisory responsibilities include:1. checking the company's finance,2. supervision of directors, senior management's behavior,3. when the directors, senior management personnel harm the interests of the company, asking them to be corrected,4. proposed the convening of extraordinary meetings,5. submit proposals to the shareholders meeting,6. of directors, senior management proceedings. Such a structure seems to be more reasonable, and seems to solve the internal person control problems, but in fact, the supervisory boards of listed companies not fully play its supervision and administration. The phenomenon of internal control is still a serious.Both the two kinds of the corporate governance structure have the certain defects. In order to improve the structure of the board, national companies have independent director system. They hope to improve the status of the power imbalance by the functions of the independent directors. In August 2001, China securities regulatory commission announced the establishment of independent directors in the listed companies. Independent director system in China has adopted in some years. What is the impact of the introduction of independent director system in China and what is the present state of independent directors in our country have become the topic of our concern.In this paper, based on previous studies, the author explores other characteristics of independent directors. For example, whether the location between company and independent directors are the same, whether the independent directors hold shares in listed companies, and so on. In this paper the characteristics of independent directors will be divided into several categories.1, the individual characteristics of independent directors on the effectiveness of company performance. Such as the education and professional background of independent directors. The education can be divided into doctoral degree, masters, undergraduate, and others, Professional background can be divided into a financial and accounting background and other independent directors.2, the characteristics of independent director posts on the effectiveness of company performance. Such as the proportion of independent directors in board. 3, the qualities of independence of independent directors on the effectiveness of company performance. Such as the remuneration of independent directors and so on.4. The behavioral characteristics of independent directors on the effectiveness of company performance. Such as the type of the view the independent directors proposing in the board. Author hopes to find the influence to the performance of the company by introducing independent director. In addition, this paper uses two indicators to measure performance of the company, accounting performance and market performance, in order to get more accurate results.The main conclusions are as follows. When the independent directors have a higher pay, the company's performance are usually better. And when independent directors propose about the supervision and strategy, the company's performance is better. In addition, the higher degree of independent directors, the company's performance is worse.1, the relationship between pay and company performance is positive. The research found there is a positive correlation between pay and company performance. Therefore, in the development process of independent director system in China, we should improve the salary system of independent directors. At the same time, we should make the pay in a reasonable range in order to ensure the independence of independent directors.2, the relationship between the view of independent directors proposed in meetings and company performance is positive. The research found there is a positive correlation between the type of view and company performance. These results are the same with the author's hypothesis. When independent directors propose about the supervision and strategy, the company's performance is better.3, the relationship between the education and company performance is negative. The research found there is a negative correlation between the education and company performance. This result is also not the same with the author's hypothesis. Author believes personnel system of independent directors is not very perfect. The highly educated professionals are the preferred candidate of independent directors. So these people will often be as an independent director in several listed companies. This will impact on their work as an independent director.According to the above conclusion, the author made the final stages of the article about the views of the Independent Director System. For example, the power and responsibilities of independent directors and board of supervisors should be clear. And we also should improve the efficiency of independent directors. We should further enhance the independence of independent directors, and improve the selection mechanism, incentive mechanism, and restraint mechanism.