Independent Director And Firm Performance

Since the introduction of independent director system in China,its effectiveness has been the focus of corporate governance research issues,and the relationship between board independence and firm performance did not get a unified conclusion.These studies have been explored in terms of observable corporate and directors characteristics,but ignores the effects of unobservable corporate and directors characteristics,resulting in missing variables、endogeneity and other issues.For the above reasons,this paper uses the AKM model to study the relationship between board independence and firm performance on the basis of the unobservable characteristics of independent directors,and verify the relationship between independent directors and their unobservable personal effects,we can find the preference in the process of selecting the independent directors.Based on the 2008-2015 annual data of listed companies in Shanghai and Shenzhen,using the AKM model,by concurrent and job-hopping independent directors in different companies to form a connected sample,to distinguish the firm performance in the firm fixed effect and directors fixed effect First,by comparing the two sets data of controll the firm fixed effect、not controlling directors fixed effect and simultaneously control the firm fixed effect and directors fixed effect,it is necessary to verify whether the firm performance will have different effects due to the unobservable personal effects of the independent directors.The influence of the independent observable effect on the firm performance is mainly studied from the background heterogeneity,including academic background,legal background and financial background.Finally,we further study the unobservable personal effects of the independent directors,using quantile regression to observe the distribution of unobservable personal effects under different quantiles.We can find the preference in the process of selecting the independent directors.The empirical study found that:(1)When controlling the firm fixed effects and not controlling the directors fixed effects,the independent directors has no significant relationship with the firm performance.When controlling the firm fixed effects and the directors fixed effects,the independent directors is not conducive to the improvement of the firm performance.(2)When the independent directors have a academic background,legal background and financial background,the presence of independent directors can significantly improve the firm performance;(3)Listed companies are more inclined to choose independent directors be of higher unobservable personal effects.In short,the information asymmetry will lead to independent directors information deficit to make decisions,while independent directors with a certain background can use expertise to reduce the adverse impact of information deficiencies;the unobservable personal effects of independent directors have an indispensable role between independent directors and the firm performance.