The Research On The Reputation Of Independent Directors With Legal Background And Corporate Irregularities

In recent years,the phenomenon of corporate irregularities in China is becoming more and more obvious,which has seriously affected the healthy development of the capital market.Only by continuously improving the corporate governance structure,can enterprises’ violation be effectively restrained.The introduction of independent director system is an important part in the process of improving the governance structure of listed companies,it plays an important role in corporate governance.However,as the controlling shareholder holds the leading position of the company,they determines the selection and appointment of independent directors,which makes it difficult for independent directors to maintain independence and fail to play an effective role in supervision.The reputation mechanism of independent directors is an effective incentive way,which can motivate independent directors to play a supervisory role to a certain extent by transmitting the signals about independent directors to human capital.Therefore,it has certain value to study whether the reputation mechanism of independent directors can encourage independent directors to actively exercise supervisory power,so as to inhibit the behavior of corporate irregularities.Based on the principal-agent theory,stakeholder theory,resource dependence theory and reputation incentive theory,uses the method of constructing model and empirical analysis,selects the listed companies of Shanghai and Shenzhen A-shares in 2008-2014 as samples to study the impact of reputation of independent directors on corporate irregularities from the perspective of legal background.The research results show that the reputation of independent directors with legal background is significantly negatively correlated with corporate irregularities,that is,independent directors with high reputation can actively perform supervisory functions and constraint corporate irregularities.Compared with the reputation of theoretical legal scholars,the reputation of practical lawyers inhibits the irregularities of listed companies more significantly.The legal environment in the location of listed companies is helpful to restrain corporate irregularities.The higher the level of legal environment,the greater the restraining effect of independent directors with high reputation legal background on corporate irregularities.This paper not only supplements the research on independent directors with legal background,but also expands the research on the reputation of independent directors.It also provides reference for listed companies to select independent directors with legal background.