Industry Expert Independent Directors And Board Governance Performance

In order to solve the problem of principal-agent problem arising from the separation of ownership and management and protect the interests of investors,the issue of the board governance performance has been widely noticed by scholars and entrepreneurs.The discussion of the independent director system and the governance performance has been become the research hotspot.According to the "Guidance" promulgated by the SFC,listed companies must employ independent directors and there should be at least one accounting professional.For industry-specific industries,such as the pharmaceutical industry,machinery manufacturing and electronics industry,industry expert independent directors may play a greater role in improving board governance performance.By reading the annual reports of listed companies,it is found that more and more professors of Science and Engineering,medical experts,senior engineers and other retired executives of companies in the same industry become independent directors in the board.These people belong to the category of independent directors of industry experts.Thus,can industry expert independent directors improve the board governance performance? Based on the "dual function view",of the independent directors and the function of the special committees set up by the board,this paper studies the specific functions played by the industry expert of independent directors.If the industry expert independent directors can effectively play the supervisory function and the strategic support function,industry expert independent directors can improve board governance performance.This paper chose the private manufacturing companies listed in Shanghai and Shenzhen A shares from 2010 to 2015 as the research samples,and studies the relationship between the industry expert independent directors and the board governance performance.After the empirical study,the following conclusions can be drawn:(1)industry expert independent directors can effectively carry out the supervisory function,especially after the listed companies employ the industry expert of independent directors,which significantly improve the earnings management and the salary-performance sensitive of the executives.(2)industry expert independent directors can effectively play a strategic support function,specifically industry expert independent directors significantly improves the company's investment efficiency,inhibit inefficient investment behavior,significantly enhance the value of the company.The above conclusions have passed the endogeneity and robustness test.Therefore,this paper believes that the industry expert independent directors can improve the board governance performance.