Inter-regional Impact Of Corporate Governance

Chinese geographical area is vast.Although listed companies in different regions are in the same macroeconomic environment,but the economic development level,marketization level,legal level,and government governance of the listed companies are different in external environments.Generally speaking,in areas with good external governance such as legal system and market competition,the corporate governance system is often perfect,and both the agency problem and the information disclosure distortion problem are effectively controlled.But in areas with poor external governance,the legal system protects investors’ interests weakly and often leads to a series of corporate governance issues.At the same time,in addition to the directors of the local region in listed company,there are a large number of directors who were employed in different places.If the directors with different experience in the field participate in corporate governance will have a regional impact on corporate governance standards and governance levels.It’s an important issue worthy of attention.The existing literatures have studied the impact of factors such as the background and experience of directors on corporate governance,as well as the impact of regional differences caused by different levels of marketization and different levels of legal system on corporate governance.The research finds that if the region’s level of marketization and legal system are higher,the higher the governance level of listed companies,which is usually reflected in the improvement of information disclosure quality and the decline in agency costs.With regard to the background and experience of directors in the study of corporate governance,scholars have found that the level of corporate governance of listed companies with accounting,law and college background tends to be higher.Usually,the older the directors,the higher the level of education,the better the internal control quality of the company.Especially,if the directors have overseas experience,the improvement of corporate governance is often more obvious.However,whether the directors of listed companies from different external governance environments will play a role in the governance of directors has not been revealed.The difference in the external governance environment of the company in the directors’ experience is likely to have an impact on the current corporate governance.The external environment usually has a large impact on the individual’s philosophy and behavior.Generally speaking,in the higher marketization level,the legal system is more perfect and the market competition mechanism is more balanced.Therefore,in the highly competitive talent market,directors with experience in higher marketization areas tend to have stronger professional competence.Coupled with environmental factors,the directors often create a market-oriented concept that is customer-oriented,pays more attention to efficiency and respects market rules.At the same time,due to the improved governance mechanism of listed companies in higher marketization areas,the board of directors can better perform its duties,directors will play a better role as supervisors and the motivation to participate in governance is also stronger.In addition,the more perfect the legal system,the stronger the protection of the law for investors,the higher the illegal cost of company shareholders and managers,and the problem of large shareholders’ short-selling behavior and information disclosure distortion will be correspondingly curbed.Although the directors are elected by the shareholders,their behavior will represent the interests of the shareholders.However,the behavior of directors will also be affected by the environment,so that their participation in governance will be more in line with or adapt to the legal and regulatory requirements of their environment.Therefore,we can infer that the market concept,motivation,ability and behavior of participation in governance held by directors with experience in a higher level of marketization will have an important impact on corporate governance.Based on the above logic,this paper selects the A-share listed company of China Shenzhen Stock Exchange from December 31,2010 to December 31,2017 as the initial sample of the study.And according to the registered place of the listed company,it is divided into regions with higher marketization level and lower marketization level.Then we theoretically analyze and empirically study the transmission effect of corporate governance level through the experience of directors from a higher level of marketization to a lower level of marketization.This paper finds that the participation of directors in the higher level of marketization in the corporate governance will have a regional impact on corporate governance standards and governance levels,and thus have a conduction effect on corporate governance levels between different regions.The employment of listed companies in low-market areas with higher marketization levels can reduce the first type of agency cost,second-class agents and improve the quality of corporate information disclosure.And higher the market-level regional experience,the higher the proportion of directors in the board of directors,the longer time of appointment,the above effects are more obvious.The research in this paper theoretically reveals the transmission effect of corporate governance level between regions,enriching the research on the impact of external environment and director characteristics on corporate governance.In practice,the conclusions of this paper can provide guidance for the board of directors of listed companies and the employment of directors,and provide a reference for regulators to improve corporate governance and promote talent mobility at the regional level.