An Empirical Analysis Of The Relationship Between General Manager’s Power And Corporate Performance Volatility

Since the late1990s, China began to focus on the significant function of corporate governance in the company. With the deepening of market-oriented, economic system transformed and the mode of production has changed. Developments of listed companies face a variety of complex environments of uncertainty. How to fully weigh the risks and benefits in the case of strategic decisions and take the appropriate business plan, maximize corporate performance and minimize company business risk is particularly important for the company to maintain long-term stable development. Using reasonable corporate governance structure can effectively solve conflicts between stakeholders and managers, resistance to the inner and the external environment risks, and keep corporate business running efficiently and to maintain a strong market competitiveness. As an important part of the company’s internal governance structure, the source, configuration, usage and limitations of general manager powers will be of an important impact on the level of corporate governance. Previous research literatures tend to examine company performance using to level governance structure how to affect the level of corporate governance. But corporate performance stability studies is still relatively lacking. Based on the principle of matching benefits and risks, whether corporate governance structure is valid for the promotion of the development of long-term stable operation or not, not only reflect in improving the company’s performance, but also should be reflected in effective controlling firm operating risks. General Manager of listed companies is often able to some extent affect the company’s strategic development decisions, thereby affecting the company’s operating results. General Manager Powers will not only affect performance, but also affect the performance volatility. In general, the greater of general manager power, the smaller of behavioral constraints and the more individual factors include in decision-making process. In this case, the business decision-making increases the probability of extreme values, so as the company performance volatility. In order to promote long-term stable development of China’s listed companies, improve the corporate internal governance structure, we need to discuss the relationship between General Manager Powers and company performance volatility with the consideration of China’s actual situation.Based on the existed theory and domestic and foreign analysis, this paper chooses8indicators measuring the strength of general manager power. I put forward hypothesis on the basis of theoretical analysis of the relationship between indicators and performance volatility. Combining with qualitative analysis and quantitative analysis method, selecting the2009-2012Main Board listed companies in Shanghai and Shenzhen as samples to study the relationship between general manager power and performance volatility. According to the empirical test results, I draw the following conclusions.Firstly, there is a significant positive relationship among5general manager power indicators and performance volatility, including Dual, Boardsize, Indedir, Share and Tenture. Dual enhance control and influence of general manager in decision-making. Oversized Boardsize lead to inefficient supervisory and control to general manager behavior. Taking into account the Independent Directors may suffer from background knowledge and energy limitations, imperfect elected appointment and other factors influence, balancing and restricting general manager power did not achieve the desired results. Manager can gain power from holding shares. Long tenure managers have a strong influence and prestige of the force in the company. In these cases, general managers can impact firm outcomes because they have influence over crucial decisions. Powerful manager can reduce the supervision and control of the board of directors, therefore the company’s final decision contain intensive manager individual will. The likelihood of either very good or very bad decisions is higher in this situation; thereby variability in firm performance increases and gains the risk of operating results.Secondly, Payper has a significant negative impact on firm performance horizontal dispersion, but it does not have a significant impact on longitudinal volatility. Maybe powerful general managers make decisions of keeping his inertia. Therefore, corporate performance stably maintains the status of deviation from the normal state in long-term, performing less variability. Thirdly, Edu and Ptjob have no clear relationship with performance volatility. Finally, Ptjob has a significant negative impact on firm performance volatility.