Research On The Impact Of The Resignation Of An Independent Director On The Value Of An Enterprise

In order to protect the interests of those small and medium shareholders and prevent large shareholders emptying the firm,according to the "dualistic" function,the basic roles of independent directors are supervision and resource supporting,however,the supervision is more important.Obviously,if a listed company hires an independent director only to acquire an resource supporting rather than a supervisory role,the value of an independent director will deviate from the intent of the system.This is precisely one of the problems of the independent director system in our country.Because of the special national conditions,listed companies are willing to hire retired officials as independent directors to build friendly relations with government departments seeking policy resources.The current stage of our economy is in transition,the relevant laws and regulations have not yet sound,so official independent directors will inevitably produce money trading and breed corruption,which is not conducive to the establishment of a honest relation between government and enterprise.Therefore,our state has introduced a corresponding policy to standardize and limit official independent directors.On October 18,2013,the Organization Department of the CPC Central Committee promulgated the Opinions on Further Standardizing the Issue of Part-time(Serving)of Party and Government Leading Cadres(COD.NO.18 Paper).The paper put forward some relevant restrictions about the part-time or service of the party and government leading cadres in the enterprise,including the relevant provisions on the independent directors in the listed companies.After the introduction of the document,those who do not meet the conditions of the party and government cadres,resigned from the listed companies.The resignation of official independent directors will cause negative reaction of the investors,that is the stock price of listed companies will decline? This is the problem which this paper will explore.In China,according to the nature of property rights,the listed companies can be divided into state-owned enterprises and private enterprises.Behind the state-owned enterprises are the government or its related departments,which have a natural political connection.But private enterprises are different,mostly are "self-reliance" with no natural political connection.Therefore,a lot of tax incentives,government subsidies,and franchise rights,private enterprises are not as state-owned enterprises as "easy" to get.Appropriate political relation is even more important for development of private enterprises.According to the institutional environment theory,enterprise's business activities and business behavior are different because of different institutional environment.In a well-established environment,those resources that enterprises need can be obtained through fair market competition,and the government will not interfere with the enterprises.In a region with poor institutional environment,the market competition mechanism is not perfect and the market can not play a decisive role in the allocation of resources,and the government put more intervention in the market,so a lot of key resources are in the hands of the government.In this region,many resources is not through fair market competition to get,but with help of the friendly relations with the government.Therefore,different property rights and in different levels of market-oriented areas,the motives of selecting official independent directors for listed companies are different.So the responses of listed companies to official independent directors are different.Based on the promulgation of COD.NO.18 Paper,we collected the resignation reports of official independent directors of two years from 2014 to 2015,and we obtained a sample of one hundred and eighty six listed companies.This paper adopts the method of event research,and the dependent variable is CAR(-3,3).Firstly,we analyzed all the samples.Secondly,all the sample companies were divided two groups according to the nature of the property rights and the level of marketization,and then we analyzed these two groups.The purpose is to get a comprehensive examination for the stock price of listed companies with different natures of property and marketization levels because of the resignation of the official independent directors.Through the analysis,this paper drawn the following three conclusions:(1)The stock prices of listed companies is negative when meeting the resignation of official independent directors,and the higher level of official independent directors,the stock price of listed companies is more negative.(2)The stock prices of private enterprises is more negative than the group of state-owned enterprises when meeting the resignation of the official independent directors.This shows that the private enterprises have an resource supporting to hire official independent directors.(3)In different marketization levels groups,although the two groups have the same statisticalsignficance,but the stock prices of listed companies with low marketization level is more negative when meeting the resignation of the official independent directors.This shows that those listed companies in low marketization level have an resource supporting to hire official independent directors.Finally,according to the conclusion,the author put forward the corresponding policy suggestions for the selection of official independent directors for our listed companies and the improvement for the independent director system.