Empirical Research On The Correlation Of Independent Director's Replacement And The Style Of The Audit Opinion

The aim of the independent director system is to restrict the rights of the holding shareholders and supervise their actions by introducing the outside power. However, as we know, the practice of the independent director system doesn't satisfy. Since the independent director system is brought into effect in China, the change of the independent director is very frequent. Why does the change happen so frequently? What is the deep-seated reasons of the change?The paper will analyze the reason from the view of the effect of the company governance in China on the practice of the independent director system and the point of the risk of the independent directors in carrying out their responsibilities. The paper points out that the change of independent directors is correlated with the style of the audit opinion by introducing the theory of rent-seeking and risk-avoiding. The paper studies the public companies at Shanghai and Shenzhen stock exchange in China during period of time from 2003 to 2006 by applying traditional statistics method. The results indicate that the change of independent directors is correlated with the style of the audit opinion and the characteristics of the independent directors also affect the audit opinion. At last, the paper will bring forward some suggestions about how to perfect the system of independent director according the before-mentioned analysis.