The Relationship Between Board Characteristics And Diversified Operating In Private Listed Company

Since the reform and opening are three decades, China’s market economy system is continuously improved, the private economy has become a increasingly prominent position in the national economy. With the constant expansion of private enterprise and competitiveness enhancement, many enterprises are gradually developed into a large-scale enterprise groups across different industries by internal development and external acquisitions, diversified operating has been a strategic choice that domestic private companies can take to become bigger and stronger in a moment. However, many private enterprises do not achieve better development in new business areas on the diversified road, on the contrary, they are pushed into an unexpected plight. Proxy hypothesis think diversification is a manifestation of the agency problem diversification is often an irrational self-serving behavior. Managers can reduce their unemployment risk and increase pay levels and get more power and prestige through diversification, though diversification will damage the interests of the shareholders, they will continue to choose the diversification, resulting to the diversified level too high. Therefore, enterprises with the choice of diversification are not always rational, many companies choose diversification, which will reduce the value of the company.Diversified operating of the company are operations of the board, the board plays a vital role in corporate governance. The company’s principal shareholder commissioned by the board shall exercise supervision and management. One hand, the board requires formulating and implementing the company’s business strategy, on the other hand, managers conduct effective supervision and encouragement for the managers, aiming to keeping the protection of shareholders’wealth maximizing. Whether the corporate governance is success lies in the functions of the board of director. The company’s ability to make proper diversified operating and the function of board of directors play an important relationship. The function of board of directors largely depends on the characteristics of the board of directors, so the characteristics of the board of directors also have an important role in the choice of diversification operation. llow the characteristics of the board of directors affect the company’s diversified operating, few previous studies have a specialized research. This paper attempts to study their relationship by empirical research and analysis to provide a theoretical basis for raising the level of corporate governance and making good diversified operating choices.In this paper, we use the sample of all private enterprises listed in Shanghai and Shenzhen from2009to2011, using descriptive statistics and empirical test to study the relationship between the characteristics of the board of directors and corporate diversified operating. Through the study we find:the characteristics of the board of directors can really affect the company’s diversified operating, such as the increase of the number of meetings of the board of directors and senior management rights set can cause blind diversification behavior occurred. The increase of the size of the board and the increase of proportion of independent directors was able to promote the correct diversified operating choice.