| Since the 1960s, in the US-led western countries, each big public company’s equity increasingly scattered, there appeared thorough separation of ownership and management, and the managers led by CEO took advantage of the power to control the board, as a result,the corporate governance was under suspicion, In order to protect the interests of the shareholders, restrain the insider control phenomenon, the independent directors have been introduced to the board of directors in the western countries. Unlike the western countries, China’s companies adopt the two-tier system of corporate governance, the independent director system is to supervise to big shareholders and protect minority shareholders’interests. In 2001,China’s securities regulator issued《Guide Suggestion about Building Independent Directors》,which initially established the independent director system in our practice. This document established:since 2002, implement the system of independent directors in the listed companies in China, and at least one independent director has the accounting professional background. After nearly 10 years of constant improving and perfecting the system of independent directors in our country has made preliminary achievements, which has played an important role in improving corporate governance structure. However, relative to foreign mature independent director system, in China, it is still in its exploration and perfecting stage, complete theoretical system remains to be established, and a lot of practical problems have not been solved properly. With social progress and development, and social responsibility enhancement, more and more people begin to pay attention to their own reputation. After 1980s, with the development of the game theory, reputation caused more heated discussion, the independent directors are generally prominent figures of professionals, scholars and professors,which as rational economic persons, has high reputation of motives, and high reputation can increase the value of human capital. On the one hand high reputation may bring more for opportunities for the independent director, on the other hand, the independent directors also will achieve themselves by high reputation. Scholars overseas launched more in-depth studies about reputation of independent directors, they regard reputation as an independent director effective incentive and restraint mechanisms, which will stimulate independent directors earnestly implementing its supervision and strategic decision, thus reduce the agent cost caused by information asymmetry and protect the interests of the small shareholders. However, at present, less research related to this has been carried out in our country at present our country with their research in China, so is the independent director reputation mechanism similarly effective? How does it affect the performance of the company? According to advances of home and abroad based on this problem, the paper systematically summarized the research about the independent director and main achievements of reputation mechanism, analyzed the main characteristic of the independent director system and the direction of its development. The paper also expounds the meaning of reputation, reputation mechanism of development, the meaning of independent directors’ reputation, the influence of reputation to the independent directors. In the paper, author used Shanghai A-share data during 2007 to 2009 as a sample for empirical research to test the validity of independent director reputation mechanism in China. After combining the theoretical analysis with empirical research results, the author puts forward revelation and policy suggestions. Thorough research, the author expect to provide some evidence for the effectiveness of independent directors reputation mechanism in our country, in the hope of promoting our independent director system perfection and development.This paper includes six parts:The first part is the introduction, briefly about the research background, the research significance, the paper frame and research methods.The second part is the literature review. This section is about systematic review on research achievements of independent director system at home and abroad. It main includes the influence of independent directors reputation system on company performance, the development of independent directors reputation mechanism and its effectiveness research. The third part is about the independent director reputation mechanism and related theory analysis. Firstly, this section analyses the meaning of reputation and the development of the theory about reputation, and evaluate utility of reputation; Secondly, it introduces the working principle and the function of reputation mechanism, including incentive and restraint mechanisms and reducing transaction costs; Finally it studies and analyses the independent directors reputation, including independent director’s reputation classification and independent director’s reputation function analysis.The fourth part is an empirical study design, including sample selection, variable definition and description and the research hypotheses proposed. This paper selects the data of Shanghai a-share listed companies’during 2007-2009 three years as samples, based on the above theory analysis, it put forward four hypothesis:Hypothesis 1:the independent director reputation and corporate performance are positively correlated, this paper uses the independent directors office number to measure the reputation of the independent director, namely, the large independent directors office number, the better corporate performance.Hypothesis 2:the ratio of independent directors on the board and corporate performance are positively correlated, namely the stronger independence, the better corporate performance.Hypothesis 3:the independent directors compensation and corporate performance, are positively correlated, namely, the higher salary, the better reputation and the better company reputation performance.Hypothesis 4:the independent directors diligent degrees and corporate performance are positively correlated, namely the higher attendance of the independent directors on the board meetings, the more diligent, and the independent director conscientiousness will improve their reputation, thus producing positive effect on the company performance.The fifth part is empirical analysis and conclusions. This section includes four aspects, the first aspect is descriptive statistics variable, respectively analyses the statistical characteristics of explanatory variables and control variable descriptive; the second aspect is the correlation analysis, inspecting the correlation between the variables. This paper uses SPSS to do the Pearson correlation coefficients test, if the correlation coefficient were less than 0.5, it means the explanatory variables and the control variables does not exist between multiple altogether linear. The third aspect is the research findings by regression analysis, the results showed that the independent directors’reputation, independence, salary, diligent and corporate performance are positively correlated, in accordance with assumptions, and the results in statistically significant gradually strengthened. The last aspect is the robustness inspection. In order to guarantee the empirical model robustness, this paper replaced return on total assets with earnings per share, with the square of the proportion of independent directors instead of the independence of independent directors, and joined with a financial professional background of the independent directors to the model, and the result is consistent, this explains, empirical model has robustness.The sixth part is the conclusion of the study and enlightenment. Firstly, this part analyses the conclusion of empirical research, through empirical analysis, the results show that reputation and corporate performance are positively correlated, it also means, in our country, the independent directors reputation mechanism are similarly effective, it also has the function of the efficient incentives and restrictions. In order to improve the value of human capital in the future, in order to win more jobs and achieve themselves, the independent directors have higher motivation to pursuit reputation. To improve their reputation, the independent directors will be conscientious, taking advantages of their own human resource and professional knowledge to giving suggestions for the company’s strategic decisions, to supervise company management and protect the interests of small shareholders. However, in our country, the system of independent directors is still not perfect, according to the empirical results of this paper, the author put forward some relevant policy suggestions, including perfecting the system of independent directors supporting system, and strengthening the construction of legal and moral regulations; establishing fully competitive job market of the independent directors and personal credit social evaluation system, so as to improve and perfect the system of independent directors.The innovation of this paper lies in:(1)Introduction of the independent director conception, from independent director’s independence, salary and diligent degrees three aspects to analyze the reputation of independent directors, and by empirical measures, the author tests the effectiveness of independent directors reputation in China. Reputation as a qualitative variable, is not easy to measure, taking some scholars’research method, using the independent directors’office number to measure the reputation of independent directors, and puts forward relevant policy suggestions.(2)The research paper introduces game theory, from the perspective of game theory to analyze reputation. Independent directors as social person, their behaviors will inevitably suffer a certain constraints, such as instruction opinion regulation, independent directors should possess the independence, the independent directors must be independent from the company’s staff, this is constraints from independent director system. However, in order to truly play the role of independent directors, most major constraints must come from the independent directors’own point. As constantly gambling process live between company and independent directors, in order to maintain or improve their human capital value, in the repeated game, reputation play an important role. For the purpose of high reputation, the independent directors will work seriously to perform their duties.The deficiencies of this paper lies in:because of knowledge structure and range of limits, this paper also has many disadvantages and limitations, the study of some problems is some rough, in this study, this paper only use the ratio of independent directors on the board to measure the independence of the independent directors, using the independent directors office number to measure the reputation of the independent directors. And in the guidance,the introduction about the meaning of independence of independent directors is a more comparative abstract concept, therefore, this paper still the most scholars’research methods for conference, taking the ratio of independent director on the board to measure,which is on the hypothesis that independence demands have been fulfilled by the independent directors, because of the lack of perfect independent directors select mechanism, no one is sure if "independence" ever existed; and reputation is an abstract concept. The American Fortune magazine fortune evaluate the reputation of independent directors by scoring method, but because our country has not yet become effective evaluation system of independent directors, there only exists two methods of selecting the alternative variable for reputation:office number and news exposure rate of independent directors, so this paper uses office number to measure. Due to the existence of these disadvantages, the inherent logicality and compactness of this paper to some extent has been affected. |
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