A Study On The Effect Of Executive Characteristics On Financial Risk In China's Private Listed Companies

Financial risk is a key issue during the daily operation of every company,and it is closely related to the existence and development of a company.Executive team plays the most important role in the operation of a company and it has a close relationship with the financial risk.In current development of economy of China,private companies have become an important component of the promotion of China's economic development and social harmony.And they keep upgrading the GDP and increasing employment in recent years.As private companies has done so much to help the increase of the development of our economy,it is imperative for these private companies to have further development.When it comes to the problem of how to do it,the key factor of solving it is to improve the quality of the executive team of private company to avoid the financial risk.This article mainly focuses on the relationship of executive characteristics and financial risk in private companies,and the target is to find some measures build up a better executive team to avoid financial risks so that private companies can contribute to the development of China's economy continuously.The literature review of this article is based on the review of the study of executive characteristics,financial risks and the relationship between them at home and abroad.According to the principal-agent theory,upper echelons perspective theory,human capital theory and asymmetric information theory,this article integrates the research model and puts forward hypotheses.The research of this article is based on China's a-share listed companies in Shanghai and Shenzhen stock market,and finally confirmed 3147 sample data from year 2011 to 2013.Most variable data is calculated by manual work.In the empirical part,descriptive statistics,correlation test and multiple regression analysis are used in this article to null the hypotheses and analyze the relationship between executive characteristics and financial risk.The article chooses the F-fraction to express the explained variable which is the financial risk.F-fraction is consist of liquidity of company,the profit,the cash flow from the operational activities of the company and its debt-paying ability.The research shows that in China's private companies,the average salary,the average education and shareholding ratio of the executive characteristics are inversely related to the financial risks.However,company size and financial risk are positively correlated.The results also show that ownership concentration in private companies and financial risks are negatively correlated.As for the effect of the chairman and general manager of the two posts into one,the percentage of women,the average age and the size of executive team,the research shows there are no significant influences on financial risks of private companies.According to the research results,this article puts forward some suggestions on how to build up a great executive team to avoid financial risks in private companies.,including five aspects.Firstly,the company should pay more attention to the salary of the executive team.Secondly,improving the quality of the executive team is also important.Thirdly,the company can improve the ownership concentration degree.Fourthly,companies don't have to be too concerned about the average age and the sex ratio.Finally,controlling the size company can not be ignored.