The Research On The Relationship Between The Social Capital Of Outside Directors And Corporate Performance: An Empirical Analysis Of GEM Companies

Enterprise status of two rights separation lead to company owners can’t effectivemanagement and control the enterprise, appeared the phenomenon of "insider"，andthrough the "watergate" after "lockheed scandal" incident，the economists found thatthe external market mechanism for "insider" constraints is very limited. Therefore, inorder to ensure the independence of the board of directors, to solve the aboveproblems, the independent director system arises at this historic moment. In somewestern countries, led by the United States, the system was proved to be effectivelyand widely used, played a positive role in improving the scientific，safety, efficiencyof the decision-making process, strengthen the company competitiveness, prevent thecompany president and other internal controllers do whatever they want to fishcompany and shareholders’ interests, strengthen the internal mechanism of democracy,safeguard the interests of small shareholders and other company interested party andso on. Therefore, China Securities Regulatory Commission issued the guidancenamed "on the guidance of establishing the independent director system of listedcompanies" in August2001, and forcing all listed companies must hire theindependent directors, establish independent director system.After more than ten years of development, the proportion of independent directorson the board of directors of listed companies in our country is getting heavier. Inprevious studies, also using large sample data and more for the motherboardenterprises and SME，although the research conclusions have certain universality, butignore the influence of industry and corporate size. Relative to these companies, theGEM board companies has its own particularity, short time to market, small companyscale, is given priority to high and new technology enterprise and manufacturing,external resource is limited. In this case, the relationship between independentdirector’s social capital and enterprise performance may vary with main board andsmall and medium-sized plate enterprises. Therefore, this article study the relationbetween the corporate performance and independent directors system by using theGEM data, empirically the implementation effect of the independent director system and the role of independent director’s social capital of GEM enterprises in our country.In related literatures, the authors found that the conclusion of the field of independentdirectors and corporate performance is more confusion in domestic and foreignresearch. Therefore, this article will first sorting related literature at domestic andaboard, then expound the social capital theory, principal-agent theory, resourcedependency theory, stakeholder theory and other theories systematically, lay thetheoretical foundation for this study. On this basis, to determine four aspects ofindependent director’s social capital, including vertical relationship network,horizontal line network reputation and cognition, and with reference of previousliteratures, select financial indicators ROE and market indicators Tobin’s Q as ameasure of corporate performance. And put the proportion of independent directors,gender, educational background, professional background as control variables,combine with the present situation of the GEM companies to make researchhypotheses and empirical analysis. Combined with our country market system and thecharacteristics of the GEM to explain the result of the regression analysis. In the end,this paper proposes some suggestions to improve the system of independent directorsof listed companies in China, such as optimizing the selection mechanism ofindependent directors, clear the functions and powers of independent directors,promote the development of independent director of professional and perfect theincentive mechanism of independent directors.