The Research On The Relationship Between The Characteristics Of Independent Directors And Company Performance

In the condition that the board of supervisors do not play its proper supervision role, in order to ensure the legitimate interests of the minority shareholders of quoted companies, to solve the problem of abuse of large shareholders’ power in quoted companies. Relevant mandatory regulations are published in our country that requires quoted companies to set up an independent director in the board of the company. However, since the introduction of independent director system of quoted companies in our country, it became the focus of attention and the priority of study that the status quo and effects of independent director system in our country, if the introduction of independent director system improved the efficiency of corporate governance a lot, if the insider control problems caused by the imperfect corporate governance structure are improved. However, due to differences in research methods and research design, the research achievements of different scholars for the independent director system are not identical, some scholars think that the independent director system, to a certain extent, can improve the corporate governance structure, and has vital significance for the improvement of corporate performance, others believe that the independent director system does not play a proper role in improving corporate performance. There is no unified conclusion on independent director system research.Combine with the institutional background, based on the principal-agent theory, stakeholder theory and social exchange theory, through raising hypothesis on the relationship between independent directors and executives, the industry relationship between independent director and the quoted companies, the proportion of independent directors, the education level of the independent directors and professional background of independent directors, do empirical analysis on quoted companies in our country as research samples, study about the correlation betweencharacteristics of independent directors and corporate performance, trying to go further about the independent director system based on existing research, and analyze the research conclusion, to raise suggestions and policies pointing to the improvement of the independent director system.About the sample data source and selection, because variable set in this is related to education background and industry associations, the resume of the directors in listed companies and the executives need to be Compared and analyzed. Although the executives studied in this paper are limited to the chairman of the board of directors, general manager and the chairman secretary, but a sample company usually has3-6independent directors, in order to collect accurate data, there is need to compare and analyze independent directors and senior management. However, due to time constraints, and my strength is too thin, sample size is small. The article adopts the method of simple random sampling, I only study about124listed companies for2012and at last choose113listed companies as research sample due to inadequate data.This article combines normative research with empirical research, qualitative analysis with quantitative analysis, the research framework can be divided into the following six parts:The first part is the introduction:this chapter first explained the research background and the research purpose of this article,and also the research meanings.Then put forward the research paths and frameworks, and show what research method is used in this article.The second part is literature review:first part of this chapter is literature review of the effectiveness of the independent director system; And then the literature on the independent director and company performance, this part is divided into domestic literature review and foreign literature review. Last part is evaluation and summarizing on research results at home and abroad.The third part is theoverview on independent director system:first part is summarizing on the meaning generation and development, qualification and selection mechanism of independent directors. Next is statement of the role of independent directors in corporate governance structure.The fourth part is the research hypothesis:first expounds the related theories of the independent director system, including the principal-agent theory, stakeholder theory and social exchange theory. Then put forward the research hypothesis in this paper based on the above theory, and then selected the corresponding of company performance, the variables of independent director characteristics and control variables.The fifth part is the empirical analysis:this chapter first build a regression model of the empirical analysis, and explains the source of the sample data and selection methods; Then use the relevant data of113quoted companies in2012for empirical research, specific empirical method includes:descriptive statistics analysis, correlation analysis and multiple regression analysis; At last the statistical method is used to analyze the relationship between the characteristics of the independent directors and the company’s performance.The sixth part is the conclusion and policy suggestion:first is the analysis of the empirical analysis conclusion, and based on this, advances the corresponding suggestions which can further improve the system of independent directors of quoted companies in China; Finally summed up the research limitations and shortcomings, and also put forward further research direction.Through the empirical research, the research hypothesis1,hypothesis2and hypothesis4and hypothesis5is established, namely significant positive correlation exists betweenthe industry correlation of independent director and the quoted companies and the company performance; Degree of independent directors and corporate performance suggest a significant positive correlation; Government background of independent directors and corporate performance suggest a significant positive correlation as well.At the same time, through empirical test, although negative correlation exist between relationships between independent directors and executives of quoted companies and the company performance, the relationship is not significant. The independence level of the independent directors which has education correlation is relatively low, thus they cannot play a god role in supervising the senior management layer. But because at present we usually have3to6members in the independent directors of quoted companies in our country, the majority of independent directors do not have education background correlation, so the board of directors which have education background correlation have limited help to the company operating, this may be the reason for the insignificantresult of the regression. The innovation of this paper is as the following two:(1) In deducing the theoretical basis which the research hypothesis based on, in addition to the most commonly used the principal-agent theory and stakeholder theory in studying the independent director system, social exchange theory of sociology is also introduced. This theory can explain education background correlation between independent directors and management layer, and thus deduced the important research hypothesis, independent directors which has education background correlation has a negative effect on firm performance.(2) Two new variables are introduced in analyzing the relationship between characteristics of independent directors and corporate performance, namely the education background correlation between independent directors and executives and industry associations between independent director and the quoted companies. Education background correlation refers to the independent director is the guidance professor of the company’s current executive (chairman, chairman secretary, general manager) or they are schoolmates of the company executives. Industry association refers to the work of the independent director engaged in or the profession they are good at is exactly the industry the company in, namely they are the experts of the industry.The deficiencies of this paper are as the following:first, compared with other studies of the independent director system, this article only uses the113listed companies as research samples which is small; Then is the selection of variables, the index measuring company’s performance index is ROA, but due to some external factors, ROA is possibly be modified, and thus the indicators may not measure well about company performance, at the same time, the selection of independent directors characteristic variables, except for what is included in this paper, the characteristics of the independent directors also contains a lot of other variables, but because of limited technology and time, the article does not fully consider the characteristics of the other variables; Finally, there are many factors which influence the company performance, only several important factors as control variables are considered as controlling variables in this paper.