Management Experimental Research On Efficacy Of Corporate Governance Communication Models

The information asymmetry between principal and agent is the main cause ofcorporate governance issues. Building effective corporate governance communicationsbetween the principal and agent is an important way of reducing principal-agent cost,improving governance performance, and solving corporate governance issues.Based on the principal-agent theory and the theory of enterprise communication, webuild three different corporate governance communication models, Isolated GovernanceCommunicate Path(IGCP), Sequential Governance Communicate Path(SGCP) andNetworking Governance Communicate Path(NGCP). Through setting role ofshareholders,general manager and department manager as the main representative of theprincipal and agent, build business decision-making situational simulation, verify theeffects on agent communication behaviors such as collusion and disrupting to entrustmanagement cost impact in different governance communication mode.In this paper, we set the following four experiments: Experiment1tests and verifiesthe principal-agent cost agent communication and decision-making behavior caused, and inthis experiment, general manager possess all the business information, just only reportshareholder the outcome of his decision,and department manager carry out the plan.Noneof general manager, department manager or shareholder can deal with the projects via ofcommunicating with each other. Experiment2tests and verifies the impacts onprincipal-agent cost because of agent communication and decision-making behavior, andin this experiment, general manager can communicate with department manager, and justreport shareholder the outcome of his decision.Either of department manager orshareholder can deal with the projects via communicating with each other.Experiment3tests and verifies verifies the impacts on principal-agent cost because of agentcommunication and decision-making behavior, and in this experiment, general managercan communicate with department manager and shareholder.Either of department manageror shareholder can deal with the projects via communicating with each other.Experiment4tests and verifies verifies the impacts on principal-agent cost because of agentcommunication and decision-making behavior, and in this experiment, general managerdepartment manager and shareholder can communicate with each other.Through data statistics calculations and we can drew the following conclusions:Firstly, IGCP, SGCP and NGCP, the average agency costs can be ordered as follows: CA_N＜AC_S＜AC_I. The more information shared, the fewer agency cost will becaused between principal and agent.Secondly,In the model of IGCP, agents tend to take the collusion behavior with others,and do harm to benefits of shareholders to increase their income. Under the condition thatprincipals are unable to master the true information, agents will attempt to hide theinformation in order to reduce the effort level or increase their profits.Thirdly, In the model of SGCP, agents’ behavior depends on their earnings. In SGCP,the agent is a person who holds the most comprehensive information, therefore, he hadmore chances to make decision. When he finds the returns is more if he collaborate withthe secondary agents, he will behave the collusion behavior. When the client promisedreward is higher than the returns collaborate with the sub-agent, he will improve his effortlevels.At last,In NGCP, agent to collusion behavior, agents have even chance of collusionand sabotage. In NGCP,principal can communicate with any agent. Agent don’t haveexclusive information anymore. He has two behavior choice, one is collaborate with otheragents to increase their co-income,antother is imform to the principal the businessinformation principal did’t know before to get a reward.Above all, the key to solve the corporate governace issues is more than a simplecontract and supervision between the principal and agent. Enterprises should establisheffective corporate governance communication mode and incentive mechanism betweenthe principal and agent to improve the performance of corporate governance.