The Relationship Between Personal Characteristics Of Independent Directors And Corporation Performance

Independent director system, as an important part of corporate governance, has been paid wide attention at home and abroad.The main purpose of the independent director system is operated in the process of solving principal-agent problem, to improve corporate performance objectives. Community consensus that there are two main functions of the independent directors:first, they supervise the company’s operating management and the major shareholder with casting votes; second, they use their knowledge and experience and various social resources to help improve corporate performance. As we all know, when the business ownership and management are separated, due to the owners and operators of information asymmetry on the other reasons, agency costs rise. Operators are often easier to maximize the benefits from the perspective of their own to make business decisions, which will be detrimental to the interests of their actual owners. In order to protect the interests of business owners, board members introduced in a neutral and objective outside directors - independent directors, whom has the right to choose, incentive, monitor the company’s managers, to prevent the infringement of the interests of management including the minority shareholders. With the development of the company, most of the equity will be concentrated in few hands which are called controlling shareholder, because of the advantage of the right to vote, they often ignore the interests of other minority shareholders, the enterprise seems to become His personal business. They will damage the interests of small shareholders in business decision-making and the distribution of benefits. At this point, the introduction of independent directors is to prevent major shareholders of the company’s from occupying the interests of individual behavior. Furthermore, from the practical experience at home and abroad, some of the independent directors themselves are senior management or CEO, or are industry experts of this the field. Usually only with such "unwritten qualification" Talent can be selected as the independent directors of companies, which is recognized by the community. Therefore, the independent directors generally have a good educational background and higher education, and have a solid theoretical knowledge of profession, as well as rich social resources. They can provide many useful market information and business recommendations to help improve the company’s operating performance, which is also one of the reasons independent directors hired.As an important system of corporate Governance, Independent director system has been adopted in most of the world’s listed companies. Since independent director system has been promulgated for nearly ten years, whether it is applicable in China, and how is the implementation effectiveness are worthy of our concern.Since the inception of this system, the research focus of scholars has been the relationship between independent directors and corporate performance at abroad or at home, and the results of the study are not the same. The results can be divided into three categories:Independent Directors and corporate performance are related; Independent Directors and corporate performance are negatively correlated; Independent Directors and Corporate Performance do not matter. From the contents of the study, the main features of these studies are as follows:Most studies on the independent directors are stuck in the relationship between the proportion of independent directors and corporate performance. There are few research on the relationship between the independent directors from the personal characteristics and corporate performance.Being based on a summary of past research, we think it is necessary to study the relationship between independent directors of "quality" and firm performance. So, from the perspective of independent directors, we try to select the age, education, professional background which represent the personal characteristics independent directors, to study the relationship between personal characteristics of independent directors and corporate performance, hoping to find different conclusion of the study.This text is divided into five chapters. The main content and views are as follows:Chapter 1:Introduction. In this chapter, introduce the research background, purpose and meaning, research methods and innovations of the paper, and finally describe the content and framework of this paper.Chapter 2:Literature review. This part describes the main study results of independent directors from home and abroad. Only by fully understanding the findings and results of domestic and foreign scholars in this research, can it guide and inspire the ultimate goal of the research and find a starting point, in order to stand on the shoulders of giants higher.Chapter 3:The definition of independent directors and basic theory of evolution. This chapter firstly introduces the definition of independent directors at home and abroad, made the definition of independent directors. Then, it makes a brief introduction to the independent director system in the evolution of our country. This chapter focuses on the basic theory associated with independent directors.Chapter 4:Empirical research on the relationship between the individual nature of independent directors and company performance. This chapter is a core part of the full text. In this chapter, we select the age, education, professional background which represent the personal characteristics independent directors, to study the relationship between personal characteristics of independent directors and corporate performance, The conclusion are:the average age of independent directors and corporate performance are related; There are no significant correlation between the qualifications of independent directors and corporate performance; Independent directors who have both theoretical background of community and business community are related with corporate performance.Chapter 5:Conclusions and policy recommendations. T This chapter describes the main conclusions of this study and analyzes the deficiencies and the need to improve this place, and proposes practical recommendations and follow-up studies of future research prospects.Throughout the above research, this paper mainly has its own contributions as follows:(1) In this paper, we study on the relationship between the individual nature of independent directors and company performance. It is different from the past which mainly from the perspective of the independent directors of "quantity". We build a model of personal qualities, do a more in-depth analysis of its impact on corporate performance, and obtain a more meaningful and practical conclusions which provide a reference to select the independent directors of listed companies(2)We divide occupational background into three categories:independent directors of theory community, independent directors of business community and independent directors of both theory and business community. We assign a numeric value of the three professional background, to better reflect both the share of independent directors of the two components of the background, which is more conducive to analyze the influence of corporate performance imposed by independent directors accurately.At the same time, there are some deficiencies in this article as follows:(1)It is not comprehensive enough in the selection of personal characteristics of independent directors.(2) This samples of the study are not rich enough, which can not represent the relationship between the independent directors and company performance of the entire capital m4arket. Because of the difficulties in data collection and time reasons, this article only selected listed companies of manufacturing, disregarding a number of companies that do not meet the research needs of the sample, the final effective sample are only 365 companies. The scope of application remains to be further examined.From empirical model, we find that the average age of independent directors are related with corporate performance. However, no more further classification on the average ag4e to make a more detailed. We believe that there should be as an optimal age for independent directors. Perhaps after the optimal age, the relationship between the average age of independent directors and corporate performance will change. It is general and single in selection of performance indicators above, we can further select a number of performance indicators as more explanatory variables.