Agency Costs?the Reputation Of Independent Directors And The Demand Of High Quality Audit

Under the background of the separation of ownership and management,the relationship between them has always been the focus of scholars,In recent years,all kinds of news appear repeatedly that executives have been arrested due to corruption and corruption,At the same time,the phenomenon comes out one after the another that big shareholder use the control of listed companies to plunder the remaining assets,infringe upon the legitimate rights and interests of small and medium shareholders.So how to improve the corporate governance mechanism of listed companies,effectively alleviate the agency conflicts and protect the shareholders,especially the rights and interests of minority shareholders,from being infringed has become a hot topic for scholars at home and abroad.According to principal-agent theory,external auditing is the product of the separation of ownership and management,under the condition of imperfect internal governance,high-quality external audit service can reduce moral hazard and adverse selection and effectively alleviate the problem of information asymmetry,and to a certain extent,supervise and control the self-interest behaviors of senior executives or big shareholders,so as to increase the transparency and authenticity of accounting information and effectively mitigate agency conflicts.Independent directors occupy a very important position in the internal governance mechanism of enterprises.Since 2001,China has formally introduced the system of independent directors.Although it has been more than a decade since the establishment of the system,whether independent directors can play their due role has been questioned by many scholars.Incentives of independent directors generally include salary mechanism,legal mechanism and reputation mechanism.In foreign countries,the motivation of reputation mechanism has been acknowledged by many scholars.However,In domestic research whether the reputation mechanism can motivate and restrain independent directors from exerting their governance effectiveness has been in dispute.Therefore,this paper proceeds from the reputation mechanism to discuss whether and how it can stimulate the supervision of the effectiveness of independent directors.Based on the sample library of all the private listed A-share companies in Shanghai stock exchange and Shenzhen stock exchange from 2011 to 2015,this paper excludes the sample data which does not meet the requirements,and exploring whether high agency costs lead to high-quality audit needs and whether reputation mechanisms of independent director can influence the relationship between of them.After using statal1.0 software for empirical analysis,the results show that:Private companies with higher agency costs have a higher demand for high-quality audit services,while the independent director reputation mechanism plays a negative regulatory role and weakens the positive correlation between the two.That is,the independent director's reputation mechanism can motivate it to take the initiative in exercising its supervisory function and mitigating agent conflicts to effectively play the role of governance.On the basis of the conclusion of the study,this paper provides some suggestions on how to perfect the system of independent directors and how to effectively mitigate the agency conflicts,and puts forward the shortcomings of this article and the future research directions.