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Empirical Study on Board Stability and Performance

On 25/09/2013, in Management, by rain

Corporate governance mechanisms, especially board-related issues, have drawnattention from both academia and business community all over the world. This papertries to conduct an in-depth research on the relationship between board stability andcorporate performance based on previous studies.The paper screens out262Chinese listed firms which had their IPOs before Dec.31,1999. The study runs regression analyses on the panel data of these firms from2001to2010. The empirical results indicate that state-owned companies andnon-state-owned ones seem to have distinct board mechanisms. For state-owned firms,the significant connections between board stability and corporate performances statethat previous poor (good) performances will lead to board instability (stability). Inaddition, the ratio of shares held by top10shareholders, the ratio of independentdirectors in board and change of board chair have significantly correlations with boardstability. However, there are no clear evidences proving that similar relationshipbetween board stability and performance exists among non-state-owned companies.What’s more, current board stability has significant impact on performance whileLagged board stability shows no significant connection. The variables of current andlagged leverage rates and the growth rate of total assets are also significantly relatedto corporate performance.This paper conducts robust tests by introducing new variables such as the returnon total assets, the ratio of shares held by insiders, the current and lagged growth ratesof revenues and so forth. The results are consistent with previous findings.

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Corporate Governance, Corporate Investment Behavior and Corporate Performance

On 25/09/2013, in Management, by rain

Companies are playing increasingly important roles in socio-Economic system. Sostudies on corporate governance have caught wide concern from both theorists andsubstantive industry with researches becoming more and more detailed, such as studieson board structure, shareholder participation and independent directors’ remuneration,etc. These studies provide us with valuable empirical data to further improvement ofcorporate governance mechanism. However, less of literatures related to corporategovernance involved by what means does corporate governance affect economicconsequences. Based on the paradigm of “governance mechanisms-behavior-Economic consequences”, we try to find out the possible mechanism of how corporategovernance mechanisms have an impact on corporate performance.First of all, we quantify the level of corporate governance, and then we go onfurther study on the relationship between corporate governance level and corporateperformance and the relationship between Investment behavior and corporateperformance. Combining with the corporate governance theory, we study the mediatingeffect of corporate governance mechanisms on corporate performance with corporateinvestment behavior as a mediating variable, and we quantify the level of thismediating effect. Our empirical results show that: first, though corporate governancelevel in China is uneven; overall corporate governance level has been a gradualincrease.Second, underinvestment companies in China are more than that ofoverinvestment, but overinvestment is more serious than underinvestment. Third,corporate governance index and corporate performance is significantly positivelycorrelated.What’s more, better corporate governance can alleviate agency problemsbetween Management and outside investors and reduce the company’s inefficientinvestment behavior.Besides, inhibitory effect of corporate governance onoverinvestment is better than that on underinvestment. Last but not the least,corporategovernance and Investment behavior are factors affecting corporate performance, inthe process of affecting company’s performance, investment behavior is as a mediatingvariable, and it only plays a partial mediating effect.

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Corporate Governance of State-owned Enterprises in China and Countermeasures

On 23/09/2013, in Management, by rain

Corporate governance is the core of the modern Enterprise system, the survival anddevelopment of the modern Enterprise depends largely on corporate governance. China’sstate-owned enterprises is an important foundation of the national Economic developmentand the key force, since the establishment of modern enterprise system, corporategovernance reform of state-owned enterprises has made some achievements andexperiences since the Third Plenary Session of the14th Party Congress, but also theconstruction of the corporate governance system far from complete, are faced with manychallenges and difficulties in the theory and practice. The corporate governance ofstate-owned enterprises at home and abroad has been made in certain research results andpractical experience, corporate governance, this problem has not been fully resolvedfrom the theory and practice. Options and corporate governance model closely related tothe development of practical and cultural traditions of the country to operate Chinastate-owned enterprises must be combined with the universal values of corporategovernance theory, to meet the requirements of Chinese characteristics. Neitherregardless of China’s national conditions theory and practice of copying foreign, can notbe overemphasized with Chinese characteristics, while ignoring the Basic principles ofcorporate governance. This paper uses the theories of Economics, Management, system ofgovernance of state-owned enterprises, conducted in-depth analysis of the reasons of thegame model of state-owned enterprise corporate governance problems, the rich corporategovernance, especially state-owned enterprise corporate governance theory.This article is divided into four chapters, the first chapter is a literature review,including foreign, domestic Theoretical Research on corporate governance ofstate-owned enterprises. The second chapter of China’s state-owned enterprisesgovernance the conflicting objectives of the dual role of the State, the board ofsupervisors role in weakening insufficient incentives for moral hazard of managers andbusiness operators and other issues and in-depth analysis of the reason for the existenceof these problems. The third chapter describes the Basic approach of the United States,Japan, Germany’s state-owned enterprise corporate governance and China can learn from the successful experience. Chapter IV of the problems for China’s state-owned enterprisecorporate governance and the reasons put forward countermeasures and suggestions ofinvestor behavior norms, improve the board of supervisors system constraint thebehavior of managers and improve the operators incentive system.

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The Research on optimization of K CORPORATION LIMITED’s Equity Incentive

On 23/09/2013, in Management, by rain

Equity incentive is a kind of long-term incentive and restraint mechanism. Thismechanism is carried out through granting the operators some of the Enterprise sharesso as make them connected to the benefits of shareholders and take the equivalent risks.Therefore, the agent problems resulted from the separation between ownership andmanagement can be mitigated effectively. Since the equity incentive came into being,the state of development of equity incentive is in a fairly sophisticated time. As aneffective incentive mechanism, the results through which created have gained lots ofrecognition. More than90%companies have carried out the equity incentive planamong the companies listed in NASDAQ. In China, there is a compatible view on theimportance of the Management equity incentive. Equity Incentive ManagementMethods for Listed Company and Trial Measurements for Implementing EquityIncentive in State-holding Listed Company were published, which indicated that theformal equity incentive system began to be established in China. In recent years, Dueto the gradually matured environment and conditions in capital market, the system ofequity incentive is also developing rapidly in China, and adopted by a lot ofenterprises.In this paper, the fundamental types and characteristics of existing equityincentive are summarized through introducing and analyzing the Basic concepts ofequity incentive system. The actual condition of K CORPORATION LIMITED iscombined based on the principal-agent theory, human capital theory and residual claimtheory of the company to analyze the implementation environment of equity incentiveand the performance after implementation, and to design its related optimum project.K is a high and new tech Enterprise that is centered on human capital andtechnical capital, which has a particular representativeness. Besides, this company canalso be used for reference on the system of equity incentive to other related companies.

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Research on the Institutional Environment and the Corporate Governance of Urban Construction Investment Corporation

On 23/09/2013, in Agriculture, by rain

Urban construction Investment corporations are important organizational tools to maintain Economic growth, expand domestic demand and promote Social stability. In the development process, it is commonplace that they have established standard corporate governance structure. However, they usually don’t go in step with the structure practically, causing inconsistency between structure and activity. The scholars of New Institutionalism tried to explain the inconsistency phenomenon with the conflict between technical environments and institutional environments, but we found it doesn’t apply to the urban construction Investment corporations. Nevertheless, the corporate governance das not been involved in the present study on urban construction investment corporations, and the study on governance of state-owned company is mainly in the fields of Economics and law, neglecting the external environment, it is lack of further exploration of practical logic and inner mechanism of governance.Based on the arrangement of the documents, the study in the article takes an urban construction investment corporation in Hezhou for case to analyze the interactive relationship between institutional environment and corporations and to explore the mmanent mechanism that why the practical activity deviate from the governance structure from the perspective of New Institutionalism. My study mainly found:1. Urban construction investment corporations in China confront complex nstitutional environments which can be divided into three parts:regulatory system, Social expectations, government role and its behavior patterns. The government plays:he role of leader in the establishment of the corporations and the inventor in the operations, and builds internal relationships with the corporations, so it affects the corporation’s operation deeply.2. All the elements of institutional environment have certain effects to the urban construction investment corporations. Both the regulatory system and the Social expectations require them to set up normative governance structure, but the governmen makes the actual corporate governance deviate from the governance structure an present such a condition that the board of shareholders and that of supervisors perfori practically no function, the board of directors misconduct and the managers ar responsible for the government rather than the corporations due to interfering th governance board. Various elements of the institutional environments have inconsisten requirements on corporate governance, and the corporations take obey strategy t answer these inconsistent requirements, they are not only obedient to the law an regulations, but also to the government, and then the loose coupling of governanc structure and operation has been caused:the corporations establish normativ governance structure, but the practical governance process isn’t entirely in accordanc with the structure, and it mainly operates under the interference of government.3. Owing to the unequal power relations between governments and corporation; urban construction investment corporations have to subject to the interference of th government in the current. So we should change the relations between governments an corporations, supplemented by improving the formal institution, to perfect th governance structure of urban construction investment corporations.4. Seeing from the theory of organization, in addition to the contradictor requirements between technical environments and institutional environments, th non-coordinate requirements to organizations from different institutional environmer system, is also the reason for the loose coupling of structure and operation c institutional organization.

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Empirical Study of China’s Listed Companies in Debt Management

On 23/09/2013, in Management, by rain

Now, more and more people are concerned about the Management of enterprises,especially through the issuance of stock to improve the level of corporate governance andoperating conditions of the phenomenon is increasingly common, but how to increase thedebt ratio to improve the operating conditions of the company is still relativelyless. Fromthe corporate financing and how to manage the Enterprise as the background, acombination of theoretical and empirical research approach, in-depth analysis on the foureffects of the introduction of the Debt Financing of China’s listed companies on corporategovernance. These four effects include dilution managers the right to the use of free cashflow, leverage effect of debt on firm performance effect of the threat of bankruptcy, thecreditor directly involved in the company. The validity of the theory and the currentsituation of the effect of the analysis of the above four claims governance of listedcompanies in China, pointed out the direction for the better Management companies.This article first look back to what the research results of the advanced countries ondebt Management, these results are summarized, and see that their analysis is divided intothree levels: first level is to choose what kind of ways to raise funds, the second level isthe financingagency theory; the third level is the introduction of debt financing, corporategovernance has no effect. Then analysis of our study, most of China’s analysis of why theintroduction of our debt financing does not work to improve the management of theenterprise.Then theoretical analysis on debt management, and summarizes the actual situationof China’s listed companies in this area, formulating hypotheses, an empirical testanalysis in accordance with reality. Balance the sampling rate, the debt ratio of currentassets, long-term asset-liability ratio and return on net assets regression analysis, theclassification of the asset-liability ratio of the turn samples were analyzed, the results didnot play a role in governance of listed companies in China claims.Finally, on the basis of the empirical test, the failure of the debt management to analyzeand put forward three suggestions. That China should fully protect the legitimate rights and interests of the creditors to change the status of the bank as a creditor, but also to draw someof the advanced practices of the country do better in this regard.

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Audit Opinion, Political Connection and Top Management Turnover

On 23/09/2013, in Management, by rain

The effectiveness of the top Management turnover is an important aspect ofcorporate governance mechanism. The effective mechanism of top managementturnover will help enhance corporate value. If the company changes top managementwhen issued by non-standard opinions is a reflection of the executive agencyproblems and corporate governance efficiency. The relationship between auditopinion and top Management turnover has an important practical significance.First, this paper reviews and comments on audit opinion and top managementturnover to clarify the problem and thinking of empirical research. Second, this paperanalyses the relationship between audit opinion and top Management turnover basedon corporate governance theory, the principal-agent theory, the contract theory andsoft budget constraint theory. Finally, we collect all A-share listed companies from1999to2008as the sample in Shanghai and Shenzhen markets. And we use Logisticregression to analyze how audit opinion influences top management turnover, furthertests how the interaction of the audit opinions and political connection influences topmanagement turnover.The result shows the evidence that the relation of standard audit opinions and topmanagement turnover is negative, suggests that the company changes topmanagement when issued by non-standard opinions. We find political connection andtop management turnover have significantly positive negative, and the interaction ofthe audit opinions and political connection and top management turnover also havesignificantly positive negative, it shows that compared to no political connectioncompany, the probability of top management turnover is low when the companyissued by non-standard opinion. According to the theory and empirical analyses, thispaper puts forward several advices as follows: First, perfect top managementperformance evaluation index. Second, improve the internal governance mechanism.Last, Cultivating and developing manager market.This topic selection has a certain novelty, study how audit opinion and political connection influence top management turnover, provides a new study angle about thecauses of top management turnover, and also enriches the research of audit opinionand political connection.

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The Impact of Corporate Governance on Top Executives Compensation

On 23/09/2013, in Management, by rain

Top Executives are the Enterprise managers of important day-to-day affairs and themajor strategic decision-makers which is related to the success and failure to enterprises.In the increasingly competitive market, whether top executives compensation iseffective, and how to incentive top executives work for shareholders effectively andsolve principal-agent problem become hot problems. The research purpose of the thesisis verify the impact on top executives compensation and sensibility between executivecompensation and corporate performance corporate governance structure in China listedcompanies by empirical analysis.On the basis of the theories and literature reviews, we raise hypothesis and groupstate owned and private companies for comparative study. China listed companies as thestudy samples, we use descriptive statistics, correlation analysis, multiple regressionanalysis method empirically test the impact on top executives compensation andsensibility between executive compensation and corporate performance corporategovernance structure in China listed companies by empirical analysis. In this thesis, weselect board of director features and power structure as corporate governancedescription. The results show that: Due to the absence of the owner, the equity structure ofstate-owned enterprises didn’t play a Management utility, private Enterprise is more likely to controlthe level of executive compensation and supervision to replace the salary incentive if the largestshareholders control greater. Independent director system in listed companies did not play thegovernance effectiveness, but a tool for executives to manipulate pay, distort the pay incentives.Two grade separation of governance is not obvious utility in the state-owned enterprises, butimprove the performance sensitivity of remuneration in private enterprises. Due to the differentnature of the ultimate control person, the Board of Supervisors scale also had a different governanceeffects, members of the board of supervisors may be more delegated by the higher authorities,therefore the larger the contrary, caused the Board of Supervisors congestion and abuse of authority,with too many policies and regulations interfere with executive Management and decision-making,thereby reducing performance sensitivity. The end of this chapter we make a robustness test tofurther validate the reliability of empirical results. The above findings improve the corporategovernance structure of listed companies in China and how to improve the effectiveness of the compensation contract to provide a empirical evidence, in the end we give thepolicy recommendations and research prospects.

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An Empirical Research on Corporate Governance and Inefficient Investment Based on Life-Cycle

On 23/09/2013, in Management, by rain

The study of corporate governance mechanisms’ effect on inefficient investmentbehavior can be divided into two categories: on one aspect, to study the test of corporategovernance mechanisms’ effect on inefficient Investment behavior; on the other, manyscholars have their focus on whether the inefficient Investment behavior can be reducedthrough improving information asymmetry and mitigating agency problems. Althoughthese studies have provided us a better understanding about corporate governancemechanisms’ effect on inefficient investment behavior, most of the tests are from thestatic level, not the dynamic level. So, it’s a great of significance to study corporategovernance mechanisms from the dynamic level.Almost all of the literature related corporate capital al-location efficiency tocorporate governance has been studied fromstatic perspective. Using the data of China’slisted firms during theperiod2005-2010, this paper conducted a research on corporatecapital allocation efficiency from dynamic perspective by designing a new index ofcorporate life-cycle, and examined the impact of corporate governance on corporateallocation efficiency.We establish a series of econometric model to empirical analysis and find:â‘ Thefindings indicate that corporate allocation efficiency was evolved with corporate lifecycle,and the degree of over-investment is decreasing at first then increasing with corporatelifecycle, while the underinvestment is invariant. The corporate governance is alsochanging with corporate lifecycle, for the group of over-investment, the duality variablehas impact on over-investment at growth stage; while the independent director at maturitystage and large stock holder at decline exaggerate over-investment, but the other variableof corporate governance have no any impacts. For the group of underinvestment, managerholding stocks is helpful to cut down corporate underinvestment trough corporate lifecycle, while duality variable at growth stage and independent director at maturity stageexaggerate underinvestment, but the other variables of corporate governance have anyimpact.â‘¡These results inspire us to improving and adjusting the corporate governancefor corporate capital allocation efficiency with much more attention to the firm lifecyclefeatures, and then identified and made targeted improvement. Our paper contributes to theliterature in at least two ways: this paper proposes a new method to classify firm lifecyclestages by unifying the merits of classification methods of scoring on four indicators including sales growthrate, capital expenditure, earnings retained ratio and firm age, andof sales growth by industry under the practical situation of China’s listed firms.

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The Empirical Study on the Influence to the Quality of Information Disclosure by Corporate Governance Mechanism in Chinese Listed Banks

On 23/09/2013, in Finance, by rain

The problems of corporate governance and information disclosure are veryimportant in the modern Enterprise and academic research. There are lots of researchabout the problem of corporate governance and information disclosure separately indomestic and in abroad, but there are less studies about combining them and making theexploration of the interaction relationship between them. Speaking of the research area,the most research pays attention to the common Enterprise, whitch makes the conclusionwhether it is suitable the financial profession, specially the commercial bank is worthdiscussing.Commercial bank is a kind of special company including the commonuniversality and particularity. Banking market is a typical market of informationasymmetry, so the question of information disclosure always makes bigger effects in thebank industry than to other industries. Especially the banking industry developmenthistory is short in our country, and the supporting system and related laws have not beenperfect, the quality of financial information has many deficiencies, and after the2007,9banks have been successfully listed A shares, there will be more and more listed banksin the future, which will lead people to pay more attention to the quality of informationdisclosure in banks, especially in the listed banks.Due to corporate governance and information disclosure system are based on theprincipal-agent problems, as the two core system in the modern enterprise system, theyare mutual influence and mutual restrict. The mechanism of corporate governance effecton the quality of information disclosure is characterized by the following: in theprincipal-agent relationship to establish a series of institutional arrangements, namelythe effective company Management mechanism, to provide protection for the highquality of the information disclosure system. Many scholars in domestic and abroadhave made the conclusion that the corporate governance structure has importantinfluence on the quality of financial information disclosure with the theoretical analysisand the empirical analysis. Specific to the listed bank, by improving corporategovernance mechanisms to improve the quality of information disclosure of listed bankis feasible and practical significance.Through collecting the data of listed state-owned large-scale joint-stockcommercial banks and other listed bank, this paper makes the research about therelationship between corporate governance and information disclosure quality with empirical analysis in banks. Empirical study shows that, the conclusion of generalcorporate governance research is not suitable for the banking industry. The internalcontrol mechanism in China Listed Commercial Banks has a little effect on accountinginformation disclosure quality, only found in the separation of the two leadershipstructure and the dispersed ownership structure can improve the quality of accountinginformation disclosure, while the board of directors, creditors and managers incentivecontract has no effect on the quality of accounting information disclosure. The statisticalresults about the product market intense competition after constraint control on thecorporate governance mechanism to form show that for the imperfect internalgovernance of listed banks in China, product market intense competition will furtherreduce the improvement of accounting information disclosure by quality internal controlmechanism.Finally, according to the existed reseach and the results of empirical research, thispaper puts forward proposals from the improvement of corporate governance in bankingsystem and the promotion of banking information disclosure quality. To encourage thereduction of state-owned stocks, optimizing banking equity structure, give full play tothe role of independent directors, truly bank chairman general manager two ministry,establish and perfect the system of audit committee, strengthen the external supervisionstrength, perfect the market mechanism of legislation, promotion of informationintermediary industry development. And to encourage banks voluntary disclosure ofinformation of listed companies, standardize company report process, guiding investorsto establish the correct Investment concept, foster competition in product marketsystem.