Research On The Effect Of Non-executive Directors And Independent Directors On Perquisite Consumption

As a product of incomplete contracts,perquisite consumption may be a way of implicit incentives for executives.However,many facts that there are frequent exposures of the costly alcohol,cigarette or business card on media,show that perquisite consumption is far from reasonable scope and is bad for companies,finally it becomes a main form of agency conflict between shareholders and executives.How to effectively control excessive executive perquisite consumption is the primary duty of the board of directors.Researchers invariably take the governance result of independent directors as the governance effect of the whole board of directors in the past literature,while pay less attention to other types of directors.Actually,there are three types of directors on the board of directors in Chinese listed companies,including executive directors,independent directors and non-executive directors.Non-executive directors who are delegated by the shareholders,are more independent relative to the internal managers and are not easy to loss independence in the process of supervision.The main focus of this paper is whether non-executive directors as well as independent directors could improve the independence and governance of the board,and then supervise executives and constrain the opportunism behaviors of executives,finally ease principal-agent conflict.Based on the formal literature,this paper researches the monitoring effect of non-executive directors and independent directors simultaneously from executive perquisite consumption perspective,and compares the monitoring effect of both types of directors.Furthermore,this paper investigates the monitoring effect of both types of directors when the company is a non-state-owned one or state-owned one by grouping regression,or whether the first big shareholder is under equity restriction or not by grouping regression.With the evidence from the Chinese A-share listed companies on Shanghai Stock Exchange during 2009 and 2013,and this paper uses SPSS software for multiple linear regression method and examines the theoretical hypothesis.The empirical study results show that there is negative correlation between executive perquisite consumption and the proportion of non-executive directors,while positive correlation between perquisite consumption and the proportion of independent directors,which meansnon-executive directors could monitor executive perquisite consumption,while independent directors don't show the expected effect on executive perquisite consumption,but worsens executive perquisite consumption.In addition,non-executive directors' monitoring effect is better than independent directors'.The research also shows,comparing to a state-owned company,when it is a non-state-owned company non-executive directors can supervise perquisite consumption more effectively,and non-executive directors can supervise perquisite consumption more effectively when the first shareholder relatively controls a company.However,when it is a state-owned company or when the first shareholder absolutely controls a company,there is clearer positive correlation between executive perquisite consumption and the proportion of independent directors.This paper presents an in-deep analysis on the structure and independence of the board of directors,and enriches the empirical evidence of the monitoring effect of the board from a new perspective.In addition,this paper provides certain enlightenment and reference for our government regulators and China's companies to improve the governance structure of corporate,ease principal-agent conflict and reduce the agency costs effectively.