The Defects Of Corporate Governance And The Due Diligence Of Independent Director

Since the establishment of the independent director system in 2001,researchers focus on independent director mechanism improving corporate governance.When the independent director can be fully independent,objective,and have a reasonable salary,sufficient time and energy and practical experience,the extent of how the directors comprehend the internal information decides the effectiveness of supervision and decision-making of independent directors.However,principal-agent relationships between the company and independent directors renders independent directors at informational disadvantage,which means that corporate governance deficiencies cause information asymmetry between independent directors and administration.The more information the internal administration and directors provide,the higher effectiveness of independent directors could be.However,for personal interests rather than the interests of the company,it is highly possible to that the administration make use of the deficiencies of corporate government to provide incomplete,not-in-time,filtered information to independent directors,which may seriously impact on the decision of independent directors.Therefore,whether the deficiencies of corporate governance can affect the performance of independent directors is worthy to study.In this paper,researcher conducts normative and empirical research with asymmetric information theory,stakeholder theory,and principal-agent theory,by independent directors of companies listed on board in 2010-2013 as samples.This researchers uses opinion active level(Opinion)of independent directors,the absence of independent directors at board meetings(IND-ABSE)and the quality of financial statements of the Company(AO)as indicators for the performance of independent directors.In addition,corporate governance deficiencies include the phenomena of deficiency of corporate governance and specific defects of corporate governance.Firstly,the samples are divided into defective group and non-defective group.The researcher utilizes empirical analysis to analyze whether the phenomena of deficiency of corporate governance would affect the performance of independent directors.Secondly,we use the OLS regression analysis and Logistic regression analysis to test whether the phenomena of deficiency of corporate governance or specific defects of corporate governance can affect the performance of independent directors.Finally,all models will be tested by robust test.The empirical result will show the content:(1)when the phenomenon of deficiency of corporate governance presented,independent directors’ opinions and the quality of listed companies’ financial statements would be poorer,and the frequency of absence of independent directors at board meetings would be more,which could explain that the phenomenon of corporate governance deficiencies can affect the performance of independent director at some extents.(2)The specific defects of corporate governance have a negative impact on independent directors’ opinion activeness level and the quality financial statements of the Company.Nevertheless,about the absence of independent directors at board meetings,chairman and CEO duality and insufficient information disclosure of listed company have a positive impact on IND-ABSE.Nonetheless,there is no significant correlation between the indicator of performance of supervisor(the proportion of employee supervisors and the Board of Supervisors stake)and the absence of independent directors at board meeting.The reason of this phenomenon may be insufficient communication with independent directors which causes the absence of independent directors at board meeting occurs,and the Supervisory Board cannot play a direct role in the communication between executives and independent directors.Therefore the empirical results cannot support the hypothesis.In terms of the outcome of all models,corporate governance deficiencies have an impact on the performance of independent directors.Last but not least,according the theoretical analysis and empirical conclusions in this paper,we put forward proposals to improve corporate governance deficiencies:improvement of the supervisory system;chairman and CEO separate mechanisms;enhancement of information disclosure.