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Corporate Governance, Cash Holdings and Firm Value

On 04/10/2014, in Management, by rain

Cash is considered as a most important part of firm’s assets. Firm’s cash holdingdecision not only reflects the firm’s operation and financial strategy, but also is closelyrelated to corporate governance situation and institutional environment. Brealey andMyers(2000) stated that the value of firm cash holdings is one of the ten unsettled puzzlesin the financial research field. The issue has aroused widespread concern of scholars inhome and abroad in recent years, whether does the corporate cash holdings have a positiveimpact or negative impact on firm value?The paper is based on reviewing systematically the relevant literature in these twodomain of corporate cash holdings the determinants of corporate cash holdings and theeconomic consequences of corporate cash holdings. Then it selects non-financial listedcompanies in Shanghai and Shenzhen Stock Exchange with complete financial data from2005to2009as samples, using the Linear Structural Equation model, empiricallyresearches the relationship of the level of corporate cash holdings and firm value, then itintroduces the corporate governance variable to study how corporate governance structurereflects the path between cash holdings and firm value.The research results show:(1)In the empirical research of the relationship of corporate cash holdings and firmvalue, the paper uses TOBIN Q and return on assets ROA as two indicators measuringfirm value to examine the association between corporate cash holdings and firm value,concludes that the firm value is negatively associated with the cash levels, the agencycosts arising from the conflicts of interests between managers and shareholders makingcorporate cash holdings pay a negative impact on firm value, which supports the agencycost theory.(2)In the empirical research of analysis of the impact of corporate governance, weselect the board size, proportion of independent directors, separation of CEO andchairman and level of managerial ownership as five indictors of corporate governancestructure, find that good corporate governance structure could significantly improve thenegative correlation between cash holdings and firm value. The more perfect the corporate governance structure, the weaker the negative correlation between cash holdings and firmvalue.(3)It’s that the five indicators the board size, proportion of independent directors,separation of CEO and chairman and level of managerial ownership can generally portraythe corporate governance structure. Besides, the empirical research concludes as follows:the board size, proportion of independent directors, separation of CEO and chairman arenegatively associated with corporate governance; the level of managerial ownership ispositively associated with corporate governance.

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A Study on the Relationship between Bank’s Loan and Corporate Governance

On 04/10/2014, in Management, by rain

The financial crisis occurred in America in2008reveals a problem that thecommercial banks all over the world ignore the awareness of risk identification andrisk control. Though the crisis doesn’t have a significant impact on commercial banksof China, it also gives us a good lesson: we must put the awareness of riskidentification and risk control a more important position. China’s commercial banksput more attention to the company’s financial indicators when signing the debtcontract with enterprises. However, more and more researches find that thecommercial banks cannot identify the earnings Management, so the financialinformation’s usefulness in the process of decision-making is harmed. Theinformation on corporate governance which cannot be manipulated by the company isthe most Basic and the most stabilized information. And the better the condition of thecorporate governance, the less information asymmetry have between banks andenterprises, and good corporate governance can reduce risk of bank operating. Socommercial banks should pay more attention on the company’s corporate governancewhen they make lending decisions. For long time, the Chinese scholars have not beinginterested in and involved the study on how the corporate governance influencing thebank loan contract, in the context of the financial crisis not far away from us, studyingthe mechanism of corporate governance influence on the bank loan contract is apractical problem for the commercial banks and the listed companies.This paper takes the companies listed in Shanghai and Shenzhen stock marketduring2007-2009as samples which meet the conditions,to find out the relationshipbetween the corporate governance and the availability of credit financing. Thecorporate governance is complex mechanism, we cannot only use one or some simplevariables to replace the condition of the corporate governance. In this paper, westructure a comprehensive index GI through the method called PCA to measure thecondition of the corporate governance. And then we use this index to study therelationship between the corporate governance and the loan size and the points ofcrediting financing.The results of the study show us that, the condition of the corporate governanceand the ability of getting the bank loaning have a positive correlation. It reflects in thefollowing aspects: firstly, the better of the condition of corporate governance, thelarger size the companies get bank loans; secondly, the better of the condition of corporate governance, the higher comprehensive point of loan. This paper not onlyriches the theoretical content on the study about bank loaning, but also reveals that thecondition of corporate governance is an important factor affecting financing. Finally,this paper has important practical significance, because it provides new way to solvethe financing constrains.

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The Study on the Behavior Goverance of Independent Directors of Public Listing Company

On 04/10/2014, in Management, by rain

Independent director system is an important component for the companygovernance and an important way to perfect the Management structure andstandardization for listing companies. The independent directors system of China isbased on the situation that the majority shareholders control the board which harms theminority shareholder’s interests to protect the interests of minority shareholders. Thissystem are introduced by the regulators who used the experience of the other countriesfor reference. China Securities Regulatory Commission issued Establishment ofIndependent Director Systems by Listed Companies Guiding Opinion on August2001which mean the establishment of the independent directors system of China. During tenyears of development and practices,great progress has been made in independent boarddirector system.By the research of the behavior regulation of independent directors,canstrengthen the supervisory powers of the board of listed companies,to protect theinterests of small shareholders,and provide useful reference to improve corporategovernance, so it has a strong practical and realistic significance.This article summaries the new vision of the independent directors system basedon the research results of independent directors from home and abroad. Learning fromscholars in the past on the independent director system effectiveness,implementationand related areas of research,its research methods applied to specific acts of independentdirectors, in-depth analysis of the behavior regulation of independent directors.Based onthe governance theory research of the independent directors,to set out with specificcases. Using the mathematical model and SPSS statistical analysis software,selected2009data for samples of listed companies in Shanghai and Shenzhen, and made anempirical study to find that incentive and restraint mechanisms has important impact onthe governance of independent directors with risk evasion awareness,and according tothe existing problems of behavior regulation of independent directors, put forwardpractical suggestions.The main conclusions of this paper:First,independent directorshave begun to play an active role in corporate governance.Second,independent directorsneed to play a more active role in voting on important matters.Third,current supportingsystem and the external environment in China is not perfect,to restricting the independent directors into play a full role in behavior regulation.This article is moretypical with the combination of normative analysis and positive analysis, qualitativeanalysis and quantitative analysis and compare and summary.

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Market Competition Corporate Governance and Financial Restatement

On 04/10/2014, in Management, by rain

The quality of accounting information is the foundation of the capital market, themassive existence of financial restatements shows that the company’s accountinginformation has some problems. As the characterization of the Enterprise surplusmanipulation, financial restatements reflect the defects of the Enterprise managementmechanism and low corporate governance efficiency. The deep reason of the poor qualityof accounting information is information asymmetry caused by the principal-agentconflict bring by modern Enterprise’s two rights separation. According to the moderncompany governance theory, scientific governance structure may help to prevent oralleviate the agency conflict. By the organization form and system arrangement such usdirectors, supervisors board and managers incentive, reduce the information asymmetryand inspire and restrain the insider effectively. Reduce motivation and possibilities of themanipulation of accounting information disclosure, So as to improve the reliability ofaccounting information. In addition, the modern competition theory provides a newperspective, that is product market competition, bankruptcy threat hypothesis points outthat liquidation threat bring by competition help agent voluntarily reduce agency costvoluntarily, The product market competition can directly affect the quality of enterpriseinformation disclosure, also can affect quality of information disclosure by improving thecompany Management indirectly.In this paper, financial restatement is the main research object, the product marketcompetition, the company Management and financial restatements organically in unitywithin the framework of research. And according to the Chinese listed companies2006-2009data and empirical tests the related theory. Empirical test are divided into twosteps, the first step, inspect the influence of company governance to the financialrestatements, the second step, divide the product market competition into highcompetitive group and low competition group. In contrast to the high and lowcompetition, the different influence of corporate governance and financial restatementslead to conclusion that the influence of product market competition to the financialrestatements.This paper gets the main conclusion: state-owned companies’ possibility of financialrestatements is less than non-state-owned holding company; the higher first largestshareholder, the smaller likelihood of the financial restatements; More equity distributionof the shareholding, the lower possibility of financial restatements; When the chairman isthe general manager, the financial restatements are more likely to happen. Executivescash salary and executive shareholding has no significant relationship with financial restatements. In the influence of financial restatements, product market competition onthe corporate governance has certain alternative or complementary relationship. Based onthe above research conclusion, this paper puts forward some policy suggestions such asbring into the Investment institutions and prevent insider control, foster professionalmanager market, reduce both one condition, and build a reasonable managementincentive and strengthen product market competition.

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Research on the Effect of Managerial Overconfidence, Corporate Governance on Investment Behavior

On 04/10/2014, in Management, by rain

Investment behavior has been the focus of theoretical research. However, comparedwith the theoretical analysis to calculate the optimal Investment, Enterprise investmentdistortion problems always exist. Investment distortions including overinvestment andinsufficient investment, the traditional finance theory mainly from the principal-agenttheory and asymmetric information theory to explain the investment distortions, it is verydifficult for the reality of some investment vision to give a reasonable explanation. Go upcentury70time, academia put forward traditional theories are based on the hypothesis ofrational man, if to relax this assumption, is not completely rational person hypothesis,closer to the reality of the situation. In1986, Roll debut with Managerial OverconfidenceTheory to explain the company decision-making problem, open the managerial overconfidence in the financial decision making to use on the curtain. So far, many domesticand foreign scholars are pushing the development of behavioral finance and development.However, managerial overconfidence metric, managerial overconfidence on financialdecision-making influence is still a problem to be solved urgently.This article from the behavioral finance theory, explore the managerialoverconfidence on corporate investment behavior. With the background of managercharacteristics as overconfidence measure index, introduced the Management sex, age,Education, length of service in four dimensions, and use the principal component analysismethod of reducing dimension, to further simplify the managerial overconfidence measureindex. And then used to quantify the managerial overconfidence, research on corporateexcessive investment, as well as Manager Overconfidence and corporate governanceinteraction. With06-10two stock markets the empirical data of listed companies,demonstrated overconfidence Management tends to overestimate gains, leading toexcessive investment.This paper draws the following conclusions: overconfident managers tend toexcessive investment, and have higher cash flow sensitivity, when sufficient cash flow,overconfident managers tended to excessive investment; the board size, overconfidencecaused excessive investment is more serious; managerial ownership increases, can’t remission of overconfidence caused excessive investment.

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Top-Manager Characters, Corporate Governance and Inefficient Investment

On 02/10/2014, in Management, by rain

Corporate Investment is one of the three major financial decision-making behavior, which is the key to corporate profits, and which is decided to base the size of the interests of shareholders. Enterprises through Investment activities to get return on investment. Therefore, the efficiency of corporate investment behavior is directly related to the ability of the business to maximize value, but also the relationship between the shareholders can receive maximum benefits. Investment has also been a hot research scholars at home and abroad.Based on Economic activity in the “bounded rationality”, we can see the manager’s decisions are not optimal, mainly due to the complex and changing environment, and managers the ability to understand the environment and cognitive ability are limited. Also, because the prevalence of internal principal-agent problem, our investments can not be completely optimal, namely, the existence of non-investment efficiency.Managers of listed companies as a corporate investment behavior makers and impl em enters, the Enterprise has a direct impact on investment behavior. The efficiency of investment and different companies vary, so what factors affect the efficiency of investment in non-business? This paper will explore the managers of listed companies in China non-personal characteristics of the efficiency of corporate investment levels. And taking into account the existence of corporate governance mechanisms, further analysis of the corporate governance of the personal characteristics and business managers of non-regulation of the level of investment efficiency. This research mainly includes the following six parts:First, proposed this research background, a brief study show that the theoretical and practical significance, explained the need for this study. Then put forward the Basic logic of this analysis framework and research methods. Finally, we illustrate this feature.Second, sort and review the relevant literature at home and abroad. In1984 Hambrick and Mason made the famous “upper echelons theory”, which managers have the characteristics of the theoretical basis of the official. Upper echelons theory suggests that the Management team characteristics and team members in-depth psychological, behavioral characteristics, whereas the deep-seated psychological and behavioral characteristics will directly affect strategic decision making and selection, can be seen the characteristics of managers associated with Management practices. Domestic and foreign scholars, empirical studies have verified this. Principal-agent problem is accompanied by generation of a modern corporate system, prevalent in the company. The principal-agent problem is an important manifestation of the conflict the interests of managers and shareholders, managers do not always act to maximize shareholder value as a target, often exhibit behavior of individual self-interest of managers in the investment behavior on the performance of the non-investment efficiency. This is not only due to the presence of principal-agent problem, and also based on information asymmetry. Shareholders are not directly involved in the company’s management, between managers and shareholders, there is a serious information asymmetry, managers can easily lead to moral hazard. Thus, managers are closely related to behavior management and personal characteristics on the efficiency of corporate investment behavior of non-correlation. For this statistical data, select the manager’s age, Education, gender, educational background and demographic characteristics of the five terms in order to represent the manager’s personal characteristics. Domestic and international research shows that managers of these demographic characteristics and level of business investment in non-efficiency-related, but different academic results are not consistent.Since the existence of principal-agent problem, shareholders in order to prevent managers to grab personal gain, on the development of a series of corporate governance mechanisms to monitor and restrict the behavior of managers. Current corporate governance mechanisms into internal governance and external governance mechanisms can be divided into four specific, that is, incentives, checks and balances mechanism, external takeover mechanism and the proxy contest mechanism. This paper only analyzes the company’s internal governance mechanism, the mechanism of incentives and checks and balances, select the chairman and general manager of the two jobs separate, the proportion of independent directors and executives to study three variables stake. Domestic and international research shows that corporate governance and business efficiency level of investment is a non-related relationship.The third, analysisd the relationship between theoretical of managers personal characteristics, corporate governance and business and investment behavior, and then make the hypothesis of this paper.The fourth, the hypothesis was studied on the basis of design. This paper selected the2009and2010in the Shanghai Stock Exchange and Shenzhen Stock Exchange listed companies as a1283sample of empirical research. Second, build an empirical model of this article, that manager personal characteristics and level of business investment in non-efficient models, and managers of personal characteristics, corporate governance and business model of non-efficient level of investment. And define the model and measure the variables, the empirical analysis for the next preparation, which is non-efficient investment level explanatory variables we refer to Richardson’s method, the level of investment equation residuals as a non-efficient level of investment instead of a variable.The fifth, it will be mixed together to form a mixed data in2009and2010sample data to be2566samples at the basis of the previous paper, and use EVIEWS6.0and SPSS13.0software to analysis,such as the model for each regression analysis to test the foregoing theoretical assumptions.Finally, according to the above analysis come to the conclusion. First, the efficiency of China’s listed companies, the prevalence of non-investment behavior; followed by personal characteristics of the business managers of non-influential role in the efficiency of investment behavior, specifically in the manager’s age, Education, educational background can significantly affect the efficiency of non-investment level, and sex and the term non-efficiency of the Enterprise is not significantly affect the level of investment; final corporate governance mechanisms on the personal characteristics and business managers of non-regulation of the level of efficiency investments are not fully achieve the desired objectives, corporate governance mechanisms still need further improvement can be summarized the proportion of independent directors on the management of personal characteristics (Education) affect the efficiency of investment behavior can play a non-expected inhibition, chairman and general manager of two level-one personal characteristics of managers (gender) level of investment and business from the non-efficiency to the expected inhibition, executive ownership proportions of managers personal characteristics (age, education, educational background, and tenure) and business investment in non-efficiency of inhibition is expected to play.The main features of this study is to examine not only the analysis of the characteristics of the individual managers of non-listed companies, the efficiency of investment behavior, but will also regulate corporate governance mechanisms as variables, to analyze the mechanism of regulation of corporate governance under the personal characteristics and business managers non-relationship between the efficiency of investment behavior.

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An Empirical Research on Managerial Characteristics and Corporate Social Risk

On 02/10/2014, in Management, by rain

Since the1980s, with the global corporate Social responsibility of booming movement,corporate Social responsibility has become a widespread community concern, companies arefacing a new risk, which we call “corporate Social risk”, so many countries in the world havebeen made laws and regulations in respect of corporate social responsibility. Moreover,since2008our country has been released a series of documents on corporate socialresponsibility and made “risk control ability” as one of the business performance evaluationcriteria of the managers in central enterprises. Managers as company strategic decisionmakers and Management leaders play a vital role in the control of corporate social risk. Anexcellent Management team will promote the company to actively fulfill their socialresponsibility and control corporate social risk to achieve the long-term development of thecompany.Based on the risk society theory, stakeholder theory, upper echelons theory andcorporate governance theory, this paper discusses the nature, characteristics and measuringmethod of corporate social risk, analyzes the relationship between managerial characteristicsand corporate social risk, then, we consider A-share listed companies in Shanghai exchangeand Shenzhen exchange between2008and2010as the samples to study the relationship. Wefind that managerial characteristics impact corporate social risk. Specifically, the proportionof male managers is negatively related to corporate social risk significantly, the average ageand “dual” leadership structure of the board of directors are positively related to corporatesocial risk significantly, the size of the board of directors and corporate social risk show ” U”type relationship, however, the average Education degree and the proportion of independentdirectors are negatively correlated, but not significantly. Further distinguishing the companylocation indicates that there are some different impacts among companies in differentregions by managerial characteristics on corporate social risk, mainly in the proportion ofmale managers, the average age and the size of the board of directors.

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The Empirical Research on Manager Overconfidence, Corporate Governance and Capital Structure

On 02/10/2014, in Management, by rain

Over the years, academic researches on capital structure always begin with theassumption of “rational man”,they ignore the psychological bias of managers.Thetheory of manager over-confidence breaks the traditional theory of “rational man”assumption,it is closer to reality cases and can better explains the financial behavior.Therefore, this paper seeks to explore the relationship between manager overconfidenceand capital structure, and explores the relationship between capital structure and manageroverconfidence under the corporate governance variable.On the basis of literature review of related research both domestic and oversea, thispaper makes use of theory of behavioral finance, capital structure and corporategovernance etc., and combines both normative and empirical research methods to make aresearch on how manager overconfidence affects capital structure from the viewpoint ofcorporate governance based on the experimental data from2007to2010of ChineseShanghai and Shenzhen listed companies. Firstly, in the view of behavioral finance, thispaper discusses manager overconfidence, corporate governance and capital structure inorder to indicate generation mechanism and the action mechanism of manageroverconfidence affecting capital structure and the connection of them from the viewpointof corporate governance. Secondly, it extracts a main cost variable by the means ofprincipal component analysis and objective assignment method, this indicator uses toexplore the relationship between capital structure and manager overconfidence, and testthe relationships between manager overconfidence and capital structure under the impactof corporate governance. Lastly, on the basis of theoretical and empirical research, thispaper makes countermeasure research how to restrain the impact of manageroverconfidence on capital structure from the viewpoint of corporate governance.Empirical analysis shows that the degree of manager overconfidence andasset-liability ratio is positively correlated,it is to say that the overconfident managers ismore in favor of debt financing than equity financing; after joining the corporategovernance variables, we find that the degree of overconfidence of the manager is decreasing in the companies that have good corporate governance, that is to say goodcorporate governance level has a correction effect on the degree of overconfidence of themanager.

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Stakeholders-oriented Toward Internal Control Evaluation Research

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

Following the “Anran”, the”Worldcom” and a series of financial scandal, theinternational society has given height attention to the internal control system. Internalcontrol is an important means of corporate governance, internal control evaluation isan important assessment to the business, scope of business, the level of competition anrisk, good internal control evaluation contributes to perfecting internal control system,and then improves the Management efficiency of the Enterprise.With the development of economy, the traditional emphasis on the interests ofinvestors “shareholders first” Management more and more damage the interests ofother stakeholders, stakeholder governance theory was gradually introduced into thecorporate governance and showed a very strong force.”The Enterprise internal controlassessment guideline” provides guidance for manager to evaluate the effectiveness ofenterprise internal control self-assessment, but the enterprise still has a lot ofautonomy on the internal control evaluation. This article, based on the classificationof stakeholder, analyses the key points of the evaluation of internal control ofenterprises by the stakeholder. On the basis of stakeholder theory, building theevaluation of internal control system, in order to expand the existing internal controltheory research category, and to provide more scientific and theoretical basis for theinternal control evaluation.The article includes six parts. The first part briefly analyzed the background ofinternal control evaluation research, and revealed the theoretical and practicalsignificance, overviewed the theory. Secondly, introduced the stakeholder theory,analysed the stakeholder theory and corporate governance, introduced the relationshipbetween internal control evaluation and stakeholder theory,fully illustrated the studyof necessity and possibility, provided the theoretical foundation to the followingresearch. The third part of the article, based on the analysis of the company’s internalcontrol evaluation of the2010year of companies listed on GEM, found that listedcompanies’ internal control evaluation of existing problems, and we found that theinternal control evaluation study in the perspective of stakeholders was necessary. Thefourth part of the article stakeholders of the internal control evaluation of personalityand the key points were analyzed. The fifth part of the article of the stakeholders inthe evaluation of internal control of key points were proposed based on the construction in the perspective of stakeholders internal control evaluationsystem,content to be introduced, the Basic frame of the system and results areintroduced, and combined with the case put forward the company internal controlassessment. Finally, introduced the paper’s conclusions and disadvantages, built thestakeholders-oriented toward internal control evaluation research by the internalcontrol self-assessment,internal assurance and the external guarantee mechanism.

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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.