Empirical Study On The Relations Between ROE And Corporate Governance Of Listed Companies Which Focus On Residential Real Estate Industry

Since the beginning of separation of ownership and control, the corporate governance problem get much attention from both the theoretical and practical circles. In the developed countries, corporate governance are much mature due to huge number of research beginning in 1932 companied by a lot of efforts offered by the practical circles, and it returned much to their healthy economy. But in China, modern corporations are too young to build a healthy corporate governance within themselves, because they were born only thirty years ago. The corporate governance system need suggestions from the theory. This article will discuss the inner relationship between companys’corporate governance and their ROE, and give some suggestions according to the outcome.The companies listed offer easy access to data, which will help a lot to the accuracy. In order to wipe out the differences result from different business, this article will choose listed companies who focus on residual house building from the real estate industry. After screening, I choose the panel data from year 2006 to year 2012 of 68 companies to study.The dependent variable is ROE, the variables include:variables reflecting ownership structure (the shareholding ratio of the first and the second to the tenth largest shareholders, whether the company belongs to the state or individuals, the proportion of shares in circulation); variables reflecting credit(Long term capital debt rate, the ratio of financial expenses against Operating profit); variables reflecting Executive Incentives(whether the company adopts equity incentive which requiring ROE surpasses certain number to take effect, the ratio of shares held by Executives); variables reflecting relations with stakeholders(the ratio of income tax against income, the ratio of employee payable against income, the log of income).The intercept change fix-effect model is been selected, which is the result of F-test and Hausman-test. In order to avoid "spurious regression", this article tests whether the unit root exits. Besides, this article use T test to analyse whether state-owned companies achieve better result than individual companies.The advices given are as follows:(1) the majority shareholder should be more strictly constrained from transferring benefit to themselves. (2) encouraging concentrated ownership. (2) setting more strict requirement on unlock of non-tradable shares to tie up the large shareholders’benefit with the company. (4) speeding up the development of direct financing market, develop the supervisory role of creditors. (5) encouraging executive stock ownership and equity incentives. (6) protecting employee’s right, promoting their master consciousness.