The Influence Of The Geographical Characteristics Of Independent Directors On Their Supervision Effectiveness

At the beginning of the 20 th century,the scale of the company gradually expanded and the business management became more complicated,resulting in the separation of management and ownership.Due to the different economic interests pursued by owners and operators,operators may act out of their own interests to the detriment of the interests of the company.In order to solve this kind of principal-agent problem,the independent director system comes into being.In recent years,there has been a phenomenon in the market that companies are willing to hire independent directors in different places.The main reasons for companies to hire independent directors in different places are to find independent directors with high reputation and strong professionalism,and independent directors who can provide resources support for enterprises' merger and acquisition and operation in different places.At the same time,scholars proposed that the geographical characteristics of independent directors may affect their supervision effectiveness.Some scholars based on the theory of new economic geography,think farther geographic distance will affect the integrity of the independent directors have access to information,timeliness,which affects different ground of the independent director supervision effectiveness,this information includes through local social relations to get "inside" information,and through field visits,independent directors and the management way of talking face to face,etc for "soft information".Even if the independent directors in different places can visit the enterprise and communicate with the management face to face,the number of such visits is limited.With the development of the enterprise and the change of the environment,the information cannot be updated timely.At the same time,the remote geographical distance will increase the cost of the independent directors and affect the enthusiasm of the independent directors in different places.Other scholars put forward that local independent directors are more likely to establish a common social relationship with the management of the company,which affects the independence of local independent directors and weakens the supervision effect of local independent directors.Then,when the independent directors in different places play an active role in the operation of the company,will the geographical distance affect their supervision effectiveness? This paper attempts to take the geographical characteristics of independent directors as the research object,and analyzes whether the geographical characteristics will have an impact on the supervision effect of independent directors,so as to enrich the theoretical research on the governance effect of remote independent directors.In addition,this paper further analyzes the impact of High-speed railway opening and ownership proportions of institutional investors on the supervision effectiveness of independent directors in different places.This paper applies principal-agent theory,information asymmetry theory,social network theory and new economic geography theory.The data of all A-share listed companies listed in CSMAR database from 2013 to 2017 were selected as samples.This paper theoretically analyzes the impact of geographic characteristics of independent directors on their supervision effectiveness,and explores the impact of High-speed rail service and ownership proportions of institutional investors on the exercise of supervision functions of independent directors in different places,and then puts forward the research hypothesis of this paper.The results show that :(1)When other conditions remain unchanged,the characteristics of independent directors in different places will weaken their supervision effectiveness.(2)When other conditions remain unchanged,the opening of High-speed railway can weaken the negative effect of geographical distance on the supervision effect of independent directors.(3)When other conditions remain unchanged,the increase of institutional investors' shareholding ratio can weaken the negative effect of geographical distance on the supervision effect of independent directors.The possible contribution of this paper is as follows: from the perspective of independent directors' governance ability,it is proved that geographical distance is an important factor influencing the effectiveness of independent directors' supervision.This paper can not only provide effective reference for the independent director selection and appointment system of listed companies,but also help the regulatory authorities to provide reference data on how to strengthen supervision in a targeted way and improve the efficiency of supervision.