Correlation Analysis Between The Corporate Intrinsic Value Of Listed Companies And Corporate Governance

As a basic component of one nation’s economy, enterprise would always captureevery investor’s attention. How well a company’s Corporate Governance Structurecould be would directly affect the investors’ estimates to the company’s value,moreover, it would indirectly change the amount of one’s Owner’s Equity. Corporategovernance is a combination of program, customary rule, policy, law, andorganization. It would highly influence the way of leading, administrating, andcontrolling a firm. In this article, the word “Corporate Governance” refers to the innergovernance structure of a company basically. From the perspective of a corporate’sorganization structure, it includes the board of the stockholders, the board of thesupervisors, the manager team and the company’s entire management crowd. Theirobjective is to maximizing shareholders’ interests. What a firm worth would follow aregular pattern by targeting at how to enhance the company’s intrinsic value throughtheir management team. It would be recognized as high productive efficiency,outstanding profitability, rapid growth rate, and give all interest related parties anappropriate return.In the recent few decades, the connection between those two concepts“Corporate Governance” and “Company’s Intrinsic Value” has caught a large numberof scholars’ attention. And most of their studies were focusing on qualitative analysis,econometrics analysis, and quantitative analysis. In order to find out the incidencerelationships between the combinations of Corporate Governance Index andCompany’s Intrinsic Value, this essay were using correlation analysis which is amethod of data mining analysis to resolve the data. Then, find out CorporateGovernance Index’s influence to the Company’s Intrinsic Value. Based on formeracademicians’ outcome, this thesis will use three different aspects which contain ninedifferent kinds of CCGI indexes to measure how well the management teamgovernance the company. To be specific, they were stockholders index, the board of stockholders index, supervisors’ index, the board of supervisors’ index, and themanager team index. Furthermore, the model were also using the ratio between acompany’s total equity and its’ total asset and the annual rate of return from thecompany’s stock to measure the Company’s Intrinsic Value. The samples werechoosing from the CSMAR data base which contains China Stock Market TradingData, China Financial Company’s Financial Data, and China Public Company’sCorporate Governance Construction Data. All of these data were chosen from thecompanies that were quoted on Shanghai Stock Exchange’s manufacture industrysection from the year2007to2011. Moreover, some disqualified companies such asST Company, PT Company, Suspension Company, Delist Company, Negative AssetCompany, and Negative Revenue Company were rejected from the sample. As a result,there were total382firms and1910pieces of data using to build up the model whichwould be used on incidence relationships analysis. At the very first, in order to get thedata which would be appropriate for incidence relationships analysis, the abnormaldata would have been rejected and regulated. After the smooth and regulate process,the data would be set in new attribute value. Then, build up the incidencerelationships analysis model between the Company’s Intrinsic Value and CorporateGovernance, measuring how the nine different kinds of CCGI indexes’ influence tothe Company’s Intrinsic Value through the incidence relationships analysis model.According to the measurement above, it would find out the best combinations ofCorporate Governance Index could lead to a better company intrinsic value. After that,the thesis would use the Level of Interest Theory to examine the conclusion from theincidence relationships analysis by using its support level and confidence coefficient.To be detailed, this would examine whether the theoretic combination of CCGI indexwould be the most effective one to affect the Company’s Intrinsic Value. Afterconsidering the realistic circumstance inside our country, this thesis try to figure outhow these indexes would affect stockholders’ interests, and which combination ofthese indexes indicates the highest Company Intrinsic Value. At last, based on theCorporate Governance Index from the CSMAR data base; the number of company’stotal asset, and the amount of the firm’s total owner’s equity from company’s financial statement that were chosen from the382public companies which were quoted inShanghai Stock Exchange’s Manufacture Industry section. This article would test andexamine whether the consequences were reliable.As a conclusion, the number of the stocks that were holding by the company’sboard of supervisor, the scale of the board of supervisor, the ratio between the numberof company’s independence director and the number of all company’s directors, thescale of the board of directors. When all these indexes where located in a specificrange, the company’s intrinsic value would go better, and the company wouldcontribute more benefits for the stockholders. According to the related conclusion anddata, this article also came up with some suggestions on how to improve anenterprise’s intrinsic value from the perspective of the Corporate Governance. Itwould help perfect our nation public companies’ governance structure and upgradetheir intrinsic value by giving theoretical and mathematical support.During the whole research process, there were several insufficient factors shouldbe mentioned. The security supervise system inside our nation is still on its initialstage, the disclosed information is incomplete and inaccurate. Thus, the collection ofpublic company’s information is partially and unreliable. Due to that reason, the thesishad to use an indirect way to choose, classify and build up the company governanceindex and its category. This would help getting the expected result but making theanalysis process less accuracy. In the later researching process, the author would trydifferent way to get more company information and data to perfect the analysis.