Empirical Research On Effects Of Baord Faultlines On Enterprise Value

To survive,grow and even be strong in the competitive market environment is the common vision for all of the profit-making organizations once established. However, difference among the amount of resources and the management level makes parts of the enterprises bankrupt in the competition, and the others owing the unique competitive advantages stand out and progress day by day. As the core of a corporate governance mechanism, the board of directors has significant responsibility for the development of the company. Diverse members of the board of directors can get a variety of information and resources. A variety of innovative decisions are produced after integrating of these resources and processing of information, companies will be more likely to gain the competitive advantages difficult to replicate, and finally improve enterprise value creation. However, with the increase of the diversity of the board of directors, conflicts and bifurcations within the team will inevitably intensify, eventually,teams are divided into different decision-making groups, namely faultlines. Whether the board faultlines affect team output and how to affect are very worth studying.Based on the study of existing board of directors governance and group faultlines, the paper firstly test the main effects of the board faultlines stength on enterprise value, and then test the moderating effects of the board faultlines distance and independent directors’ part-time situation on enterprise value based on on the unique social cultural background and situation in our country.The research results on the main effects indicate that the board social-categorical faultline has no effect on enterprise value, and the board task-realted faultline has a positive effect on the enterprise value. The results of the moderating effect show that the board social-catogerical faultline distance moderates the effect of the board social-catogerical faultine strength on enterprise value. The larger the board social-categorical faultline distance is, the larger the negative effect of the board social-categorical faultline strength on enterprise value.The smaller the board social-categorical faultline distance is, the smaller the negative effect of the board social-categorical faultline strength on enterprise value is. The board task-relatedfaultline distance moderates the effect of the boardtask-related faultine strength on enterprise value.The larger the board tasked-related faultline distance is, the smaller the positive effect of the board tasked-related faultline strength on enterprise value is.The smaller the board tasked-related faultline distance is, the larger the positive effect of the board tasked-related faultline strength on enterprise value is.The independent director’part-time situation doesn’t mpderate the effect of the board faultline strength on the enterprise value.According to the above research conclusion, the listed companies shouldfocus on the board task-related faultline strengthand make good use of the moderating effect of board faultline distance in the process of the board of directors’ construction. Legislation and articles of association should be made to prompt the restruction of the board of directors which doesn’t go well. And to ensure the independence of the independent directors’ selection, nomination committee composed of independent directors should be in charge of the selection of independent directors.