An Empirical Study On The Corporate Governance Structure And Profitability Of China GEM Companies

With the development of China GEM (Growth Enterprise Market) companies, the paper reads their profitabilities from the angle of corporate governance structure, to find out whether their high-profitable performance substantially have proper corporate governance structure as supports. The main object of the research is corporate governance structure, because GEM is relatively newly established in China, there is not much research around related topics.The paper starts with the defination of corporate governance structure, and further details of related definitions, theories and main viarables. To evaluate if a corporate governance structure is efficient, the paper selects the corporate’s profitability as the examine factor to study the impact from corporate governance structure to it. And then select China GEM companies to establish data and conduct empirical study.To define corporate governance structure, the paper agrees that this is a term that focuses on the internal company management, which includes three main aspects-ownership structure, structure of Board of Directors and management incentives. The paper also believes the ultimate goal of corporate governance structure is to improve the company’s performance and profitability.To define and scale profitability, based on previous research conclusions, the paper follows principal components analysis and established an index formed from main viarables of profitability theory.With the new index and the main defined viarables of corporate governance structure, the paper empirically studies their internal mechanism following the regression analysis and draws the conclusion.The analysis of ownership structure shows, the proportion of state-owned shares impacts profitability quite positively; the proportion of corporate shares doesn’t have significant relationship to profitability; the proportion of outstanding shares is significantly negative related to profitability. From concentration perspective, share proportion of the largest shareholder is significantly negative related to profitability; but share proportion of the top ten largest shareholders is significantly positive related to profitability.The analysis of structure of Board of Directors shows, larger BOD with more directors has positive impact to profitability; the ratio of independent directors is significantly negative related to profitability; CEO duality is positively related to profitability but the impact is not significant.The analysis of structure of management incentives shows, both salary and share incentives do not have significant impact to profitability, annual salary of management has positive impact while the share proportion of management doesn’t.Lastly, the paper provides some advices to improve and optimize the corporate governance structure for China GEM companies from the three aspects of ownership structure, structure of Board of Directors and management incentives, and also anticipates further analysis directions for future.