The Relationship Between Characteristics Of Independent Director And Firm Performance

Companies are the main body of the stock market; their structures are directly related to their own values, thereby affecting the interests of the investors. In order to oversee the company management, Check and balance the rights of major shareholders, solve the dominance problem of major shareholders. The CSRC promulgated "establish guidance system on the independent directors"in August 2001, which introduce the system of independent director formally. With the comprehensive, in-depth expand of independent director system; its role in corporate governance is also increasingly important. Independent director system has become a focus of the perfect corporate governance structure of high expectations by all sectors of society; the management is also extremely concerned about this.At present, because of selecting a different sample researcher have different conclusions of the relationship between characteristics of independent directors and company performance. To fully reflect the characteristics of independent directors of the company’s performance, this paper first make an empirical analysis of listed companies, and then divided listed companies into the ultimate control of state-owned companies and non-state company ultimately controlled, Finally, divide listed companies into the financial condition, instability and signs of financial failure according to the financial conditions index. The results multi-angle reflects the relationship between characteristics of independent directors and company performance. Based on the above ideas, this paper is divided into the following sections:PartⅠ:IntroductionThis chapter begins with the current problems in corporate governance, describes the research background and significance, followed by the purpose of this study, the proposed study and the logical structure of ideas, finally clear approach to the study.Part II:Theoretical basis and Literature ReviewFirstly describe the theory of independent directors and then review the domestic and foreign research about relationship of independent directors and firm performance, the selection mechanism of independent directors, relationship of independent directors and the quality of accounting information and other aspects. Next make a brief comment on research findings, Elicit the significance of this paper.Part III:study design and hypothesesBase on the theoretical analysis, this paper propose the following seven hypotheses:Hypothesis 1:the independence of independent directors has a positive impact on company performanceHypothesis 2:the background of independent directors has a positive impact on company performanceHypothesis 3:Male independent directors have a positive impact on company performanceHypothesis 4:long tenure of independent directors has negative influence on company performanceHypothesis 5:the same place with the company with independent directors has a positive impact on performanceHypothesis 6:the longer hours of independent directors worked, have a positive impact on company performanceHypothesis 7:Independent director salary has a positive impact on company performancePart IV:Empirical Research and Results AnalysisFirst, make regression analysis of the whole sample, obtain results of independent directors impact on performance from the overall features; and then divided listed companies into the ultimate control of state-owned companies and non-state company ultimately controlled, Finally, divide listed companies into the financial condition, instability and signs of financial failure according to the financial conditions index.(1) Independent director have a significant positive effect on performance in the non-state companies and companies with financial failure.(2) The average attendance of meetings of independent directors has significant positive effect on company performance in the state-owned company and the company with emergence of financial failure signs(3) The regression results show that the average age of independent directors had no significant effect on company performance.(4) In all of the regression analysis, the proportion of independent directors, gender, working time and place of work are not significantly affected on the performance of the company.To ensure the reliability of conclusions, we conduct a sound test. Replace some of the explanatory variables and control variables, still get basically the same findings of this article. This shows that this conclusion is robust.PartⅤ:Policy and recommendations(1) In all samples, the average attendance of meetings of independent directors and the average pay have a significant positive effect on performance; other background characteristics of the independent directors had no effect on the performance of the company.(2) Distinguish the nature of company and find that only average attendance of meetings of independent directors has significant positive effects on performance in state-owned companies, other characteristics had no significant effects; in non-state company, the average age and average attendance of meetings of independent directors has some positive effects on performance, other characteristics have no significant effect.(3) Distinguish different financial risk of company and find that just average pay of independent directors has some positive effects on performance. The main contribution of this article:(1) This paper multi-angle reflects the relationship between characteristics of independent directors and company performance.(2) Comprehensive analysis the relationship between characteristics of independent directors and performance in different companies.(3) This paper takes the financial risks into account.Limitations of this study are the following three points:(1)Article just comprises only seven features of independent directors, not perfect.(2) Some of the missing data may extent affected the results.(3) Classification of samples is incomplete...