Research On The Influence Of Board Governance On Financial Risks In GEM-Listed Companies

The GEM provide financial channels for new type of enterprises.China’s grow enterprise board was set up on October 23, 2009,when there are only 28 enterprise on GEM.The GEM has gone from strength to strength in the past five years,admitting more than five hundred companies.Even so,we have no alternative but to pay close attention to its latent financial risks. The GEM companies,with its low-barrier to GEM, youth and small scale,face even greater pressure of financial risks than listed companies on main board.It constitutes the first motivation of this study.On the other hand,the GEM listed companies have no perfect board of directors at this time,which have an important impact on financial risks.It constitutes the other motivation of this study.Prompted by these two motivations,this paper studies the inner influencing relationship between board characteristics and financial risks and some policy suggestions are provided to enhancing effectiveness of board governance.This is the outline of this paper :firstly, reviewing literature and proposing hypothesis;secondly, analyzing the inner relationship between board of directors and financial risks by means of empirical research;at last, bringing some proposals to improve effectiveness of board governance.This is the research conclusions:whether Chairman also perform the responsibility of general manager is not related to financial risks, and the board size, independent directors proportion and the number of professional committee have no significantly influence on financial risks,too.If the place where the company is located is consistent with the independent directors’ workplace,the company’s financial risks is significantly less than others.The board meeting frequency is positively related to the financial risks and director compensation, director ownership is negatively related with financial risks.According to the research conclusion,we provide some measures to enhance the efficiency of board governance.Firstly,perfect the relevant regulations of the independent director.Secondly,improve the operation mechanism of the board of directors and strengthen the functions of the board committees. Thirdly,further improve the incentivesystem.At last,restrictive mechanism and inner balance mechanism should be established and government should guide and supervise the board of directors of GEM companies.