Research On Board Structure Of China’s Small And Medium-sized Listed Companies On The Impact Of Diversification Strategy

With the development of China’s enterprise reform, the role of theBoard has been a major shift from previous insignificant unitdevelopment to important decision-making entity. Therefore, in the past30years, domestic and foreign scholars pay more and more attention toresearch on Board, in which field has made fruitful.In the past, scholars generally explore the relationship betweenBoard structure and corporate performance by two paths thatprincipal-agent theory and resource dependent theory. Based onprincipal-agent theory, scholars mainly study the relationship betweenregulatory incentives of the Board and corporate performance. The Boardis seen as an important part of the corporate governance. The function ofthe Board is to represent the interests of shareholders and overseemanagement. In addition, based on resource dependent theory, scholarsmainly study the relationship between Capital that human capital andrelationship capital of the Board and corporate performance. The Board is seen as a resource provider.Research on the impact of Board structure on corporate strategyonce was neglected by scholars. In recent years, with the increasingimpact of the Board on corporate overall strategy, scholars have begun topay attention to the impact of the Board structure on decision-making andimplementation of corporate strategy. However, research on the impact ofBoard structure on corporate strategy developed slowly at home andabroad. Especially in China, the study on the impact of Board structure oncorporate strategy is still in the exploratory stage. Overall, these studieshave several limitations, such as, industry of sample selection is toonarrow to generally explain the problem and indicators are too singleaffecting the reliability of conclusions of the study.The theoretical and practical field agree with the increasinglyimportance of strategy development to company’s growth and the role ofsmall and medium-sized companies in our socio-economic. To explorethe relationship between Board structure and company’s strategy of listedsmall and medium-sized enterprises (referred to as SME), and how the Board influence the diversification strategy decision comprehensivelyand complexly, which is an urgent research topic. Therefore, this article,studying on the impact of the Board structure of listed small andmedium-sized enterprises (referred to as SME) on the selection andimplementation of the diversification strategy behind the corporateperformance, is conducive to a better understanding of the impact of theBoard on company’s strategy decision.By selecting the samples of listed SMEs from2008to2011, thisarticle empirically tests the influence of the Board structure of small andlisted SMEs on diversification strategy. The results show: the influence ofthe size of the Board, the chairman and general of two-in-one ondiversification strategy is positive. The average age of the Boardmembers is negative. And the proportion of independent directors andwomen directors has no obvious influence on diversification strategy.In conclusion, this article proposes to five suggestions: optimizingthe size of the Board reasonable, improving the quality and efficiency ofindependent directors’ work, optimization the structure of the members’ age and the proportion of women directors, the Board structureconstruction matching with the diversification strategy, and the flexibilityof the laws and regulations on the Board structure construction.The main contributions of the article are as follows:First of all, there is the innovation of selected topic. In the past30years, domestic and foreign scholars pay more and more attention toresearch on Board. However, research on the impact of Board structureon corporate strategy once was neglected by scholars. Scholars rarelyresearch on the relationship between the Board and corporate strategy inthe context of SMEs. Fewer scholars research on the relationship betweenthe Board structure and corporate diversification strategy. This article,targeted at SMEs in China, studies on the relationship between the Boardstructure and diversification strategy, better to reflect the reality of SMEs’in China.Secondly, there is the innovation of empirical variables selected. Inthe study, the Board structure variables have included in which domesticand overseas scholars have studied and variables rarely involved. Especially the indicator of directors’ average age is almost not involvedin previous studies. Board members in different ages hold different viewsand decision-making. In theory, the work efficiency and adventurousspirit of younger Board are better than the aging. So it is bound to affectthe selection and implementation of company’s diversification strategy.This variable included will increase the empirical explanatory to someextent.