Study On The Validity Of Internal Governance Structure In Security Company

Security company is a special financial corporate and it plays an important role in the economy. As Chinese security company has become strong, they play an important role in the development of economics and society and their impacts have become more and more wider. The security company is an important in the development of Chinese capital market. So it is very meaningful for the development of Chinese capital market and economics to study governance problems of securities company.This paper studies the validity of internal governance in Chinese listed security company from board, ownership structure and manager incentive perspectives. By our study, we find that there is a significant negative correlation between board scale and corporate performance and a significant positive correlation between board scale and corporate risk, which mean that the board does not play an effective role. We also find that the ratio of independent board member is significantly positive with corporate performance but significantly negative with corporate risk. For ownership structure, the ownership ratio of first majority shareholder is significantly positive with stock PE ratio but it has no significant correlation with corporate performance and management risk. What's more, we find that manager compensation level is significantly negative with corporate performance and PE ratio, but it has no significant relationship with management risk, which mean that manager compensation incentive has no effect in the listed security company.Based on our study, we provide the following suggestions for the development of internal governance in Chinese security company:we should improve the board institution and the independent board institution in Chinese security company; we should improve the degree of equity structure balance to improve the validity of internal monitoring mechanism, which can protect the interest of small investors; we should improve the validity of manager incentive system and increase the sensitivity between managers' compensation and firm performance in order to decrease the agency cost. Last we should add more laws related to security company and strengthen supervision of securities companies in order to provide a good law environment for the improvement of internal governance in Chinese security company...