The Power Of Management Layer, Deviant Strategy,And Extreme Performance

With the development of social economy, the separation of ownership and management right of the enterprise has been separated, the owner provide capital and the manager is responsible for the operation. In this case, between enterprise management and business owners exists Information Asymmetry. Manager has the advantage of information and manager`s actions can hardly be observed. Therefore, business owners will take measures to supervise the behavior of the managers, such as the convening of the general meeting of shareholders, the establishment of the supervision and Management Committee, to hire intermediary institutions, etc.. But in the modern economic situation, the management of the enterprise and the corporate governance are more complex, the supervision of the enterprise owner is not always comprehensive or completely.In our country, due to the absence of owners, state-owned enterprises lack of supervision, the managers of have greater power in the decision on business strategy. And private enterprises as a result of Founder holding plenty of shares is also let the managers get more power.Specific business strategy of enterprises are developed and put into practice by layers of management. According to Simon’s “limited rational decision theory”, it`s difficult for the enterprise managers that always make the optimal strategy choice, they prefer to choose the strategy that satisfied themselves. If the business management layers have more power in the strategic decision-making, affected by this power advantage, enterprise management layers prefer to choose significantly different to conventional industry strategic, and this difference between diversity strategies will lead to the emergence of extreme performance——the performance either very good or very bad.With the development of China’s capital market, the share of institutional investors in the capital market is getting greater, and institutional investors is more and more important in corporate governance. They are professional investors with huge capital scale, more investment knowledge and rich experience. They are very different from individual investors who speculating in capital market. They have the ability and strong motivation to participate in corporate governance. Then institutional investors will play its role in the governance and supervision, make the managers more cautious, and weaken the effect of managers’ power on deviant strategy, and then through influence strategy difference degree to weaken the effects of management power on extreme performance.This paper established the hypothetical model, and use the data of manufacturing industry listed companies between 2009 and 2014 in our country to prove the hypothesis.The article is divided into five parts, the first part is the background and significance of this study. The second part includes two parts——theoretical basis and literature review, ——that introduced and summarized the main theory which the study based on and the researched achievements of related issues.The third part is the research design of the paper, including sample selection and filtering, data sources and variable selection and definition, and put forward the research hypothesis and establish analysis model.The fourth part is the empirical analysis, including descriptive statistical analysis of samples and the regression model.The last part is the conclusion of the study and suggestions.