Research Of The Impact Of Uncertainty On The Board Of Director Mechanisms

In the Principal-Agent model which is derived from the separation of resid ual claim rights and residual control rights, the principals and agents signal a contract to define their rights and obligations, as well as clear goals and bene fits both sides. But this contract cannot accurately describe the future state,an d the parties rights or responsibilities under each state, and agreed in advance the corresponding countermeasures and written in the contract. In other words, the contract is incomplete. Due to the asymmetric information between the prin cipal and the agent, bounded rationality and uncertainties, the final results often deviate from the expectation. Existing studies mostly research incomplete contr act from the perspective of imperfect information (information economics) and limited rational of decision makers’s (psychology and behavioral finance) to res earch, little article discuss incomplete contract from the perspective of uncertain ty, and explore the governance mechanism which is constrained to incomplete contract. The Board is the core of corporate governance, it is a bridge link b etween shareholders and management. Board of directors on behalf of sharehol ders to exercise internal supervision, incentives, appointment management functi ons, information disclosed to reduce shareholders’ investment risk. Impact of un certainty on the board mechanism, not only enriched the theory of corporate g overnance, but also for the client to understand the behavior of the agent, to d evelop an improved contract, increase investor returns provides the Experience.This dissertation rdefine uncertainty faced by the enterprise, which contains two dimensions of internal and external uncertainties, including six indexs of organization constructs uncertainty, management uncertainty, technical uncertain ty, macroeconomic uncertainty, market uncertainty and systemic. Then this disse rtation describe the basis of the selection of indicators and measurement metho ds. In the empirical research, based on the basic functions of the bBoard of di rectors mechanisms, this dissertation researchs the impact of uncertainty on boa rd oversight mechanisms, the executive compensation mechanism, the managem ent replace mechanism, and the impact of board of directors mechanisms on c ost of capital. This dissertation research the uncertainty as an important factor affecting business activities systematically. The main contents and innovative po ints are as follows:Firstly, this dissertation research the impact of uncertainty on the board ove rsight of management mechanism. Using two indicators of earnings managemen t and meetings as dependent variables, the empirical results show that the impa ct of uncertainty on earnings management level more consistent, except for the equity balance degree, other indicators are positive impact on earnings manage ment level, indicating that uncertainty weakens the board oversight mechanisms. In a further research, Detect changes in board structure, the complexity of the business, equity multiplier and systemic risk factors impact earnings managem ent in the same direction, yet the balance of the equity factors, enterprise finan cial crisis and macroeconomic forecast impact on uncertainty reversely. on earn ings management and board meetings showed the reverse development features. Through theoretical analysis, in an uncertain environment, the board weakened the oversight functions, and strengthen the advisory, recommendations, strategi c and other functions.Secondly, this dissertation research the impact of uncertainty on the manag ement incentive mechanism. Adopting the two indicators of the executive comp ensation concentration and the executive per capita pay as the dependent variab les, the empirical results show that the organizational uncertainty impact on co mpensation concentration negatively, nevertheless the impact on the per capita s alary is not obvious. Compared to compensation concentration, the negative im pact of macroeconomic uncertainty on the per capita salary is more obvious. T o a certain extent, the internal uncertainty leads to the board of directors pay more attention to the "fair", the external uncertainty leads to its more focus on "efficiency" When examining the comprehensive impact of all the uncertainty factors on the compensation, the managerial uncertainty increases the executiv e compensation, and the macroeconomic uncertainty will reduce the executive c ompensation. In addition, a significant change in the independent of boaed will lead to a small number of power executives get a relatively more pay.Thirdly, this dissertation research impact of uncertainty on management repl ace mechanism. Adopting logistic regression model, this dissertation find that t he changes in board structure and equity balance degree change will be more 1 ikely to change managemen, further analysis show that, compared to the chan ge size of the board, the board independent changes is more significant, which means the role of independent directors subject to certain restrictions. Financia 1 crisis prediction score is negative with management replace, which confirms t he financial crisis will weak corporate governance. Macroeconomic uncertainty is not significantly to management, yet market uncertainty and systemic risk re duce the possibility of management alternative. Empirical results reveal what le ad the board of directors decide to replace the management, is mainly based o n the demand of enterprise management, and less affected by the uncertainty o f the external environment.Lastly, this dissertation research the impacts of board mechanism on the co st of equity capital the condition of uncertainty. The cost of equity capital is t he expected discount rate of investors’risk value of equity capital, which refle cts the protection level of corporate governance mechanism to investors. In the multiple regression analysis, this dissertation find that the uncertainty is positi ve to the cost of equity capital, the uncertainty will lead to an increaseing of the cost of equity capital. Weakening the board of directors will increase the c ost of equity capital too. There is an jointly impact of board mechanism and t he uncertainty on the cost of equity capital, which weakend the positive impac t of uncertainty on the cost of equity capital, meanwhile reduced the validity o f board mechanism, and he jointly impact wiil result in an offsetting impact. I n the further analysis, the impact of the board of directors on equity capital c ost is more significant under the condition of internal uncertainty. Enterprises n eed to enhance the ability to handle uncertainty actively, while improve the im pactiveness of the board of directors mechanism. The two aspects reduce the c ost of equity capital jointly.