The Research Of The Effectiveness Of The Independent Directors With Overseas Background

In the last30years, as the modern enterprise system, which is "clear propertyrights, well-defined right and responsibility, separate government functions fromenterprise management, scientific management", has become the reform direction forthe state-owned enterprise, the perfect corporate governance has become the core ofestablishing a modern enterprise system. As the core role in establishing a modernenterprise system, the board of directors became the focus in perfecting corporategovernance reform on the micro level. And as the derivatives of the modern companysystem, the system of independent director has become an important arrangement inthe governance of board of directors.In2004, in order to promote the reform of joint-stock system, perfect thecorporate governance structure, speed up the establishment of a modern enterprisesystem, the state-owned assets supervision and administration commission of the statecouncil decided to select part of the central enterprises as the pilot works to establishand perfect the board of directors of the wholly state-owned company. In this process,a special kind of independent directors–the independent directors with overseasbackground begin to enter people’s field of vision, become the highlight of the reform, and has obtained some achievements. In order to better understand the effectivenessof independent directors with overseas background, based on them to participate inmaking important decisions matters voting behavior as a intervening variable, withthe board of directors’ team heterogeneity as the moderator variable, thecomprehensive investigation of the independent directors with overseas background,voting behavior and the board of directors’ team heterogeneity, constructs the theorymodel of the effectiveness of independent directors with overseas background. In themain research variables based on the reliability test, according to the theoreticalmodel, the dissertation in turn tests the intermediary effect of the voting bahaviore ofindependent directors with overseas background in making important decisions of theboard of directors and the regulating effect of board of directors’ team heterogeneity.According to the empirical analysis results, the the main conclusions of this study areas follows:1. The independent directors with overseas background in China’s listedcompanies do have a certain value effect. First of all, for the same listed companiesemploy independent directors with overseas background, the results of contrastanalysis indicate that the employment of independent directors with overseasbackground are able to bring certain company performance appreciation. Secondly, through the regression analysis between the number of independent directors withoverseas background and the corporate performance, we found that more independentdirectors with overseas background will bring a high total return on assets in thesample companies; it shows that the listed company employ overseas background ofindependent directors is conducive to the company’s financial performance ofascension. Third, for the segmentation of overseas background, the study shows thatthe independent directors with overseas study background and the company’sfinancial performance is significantly negative correlated, explaining that independentdirectors with overseas study background are unfavorable to the companyperformance improvement, that is not a positive effect on the company performance,while the listed companies have hired independent directors with overseas workingbackground are significantly positive correlated with the company’s financialperformance, indicating that independent directors with overseas working backgroundcan provide important support for the effectiveness of themselves.2. The effectiveness that independent director with overseas background playthrough the process of participating in the voting of the boardof directors is not veryobvious. The theoretical model and the analysis suggest that, actively participate inthe voting of the board of directors may become the important way for independent director to exert their effectiveness. However, after controlling for the independentdirectors with overseas working background of researching in institutions, althoughthe independent director actively participate in the voting of the board of directorsplays a positive impact on the company’s financial performance, and also cut parts ofthe influence of independent directors’ overseas working background on thecompany’s financial performance, the result was not significant. This means that, tosome extent, the special background of the independent directors can improve thecompany performance through actively participate in the voting of the board ofdirectors, but looked from the overall, its path maybe uncertain.3. The regulated function of board of directors’ team heterogeneity in the votingbehavior is relatively smaller. The board of directors as a decision-making group,such as theory analysis in the model, individual in decision making process will beaffected by the influence of other individuals. However the empirical result showsthat only the team heterogeneity of knowledge structure and professional backgroundhas the regulation effect in participating in voting behavior for independent directorswith overseas working background of researching in institutions only, for theoverseas working background of intermediaries, such as financial and legal officehave no effect. This exploratory research is based on the Chinese listed companies whichemploy independent directors with overseas background, its innovation lies in themore complete perspective of theoretical analysis and empirical research of theeffectiveness of independent director with overseas background. First of all,combined with the characteristics of independent director with overseas background,participating in voting in making important decisions in the board of directors and theboard of directors’ team heterogeneity closely together, to analyze the effectivenessof independent directors with overseas background more scientific, and in order toprovide a new thought in optimizing the governance structure and improving theefficiency of governance. Second, based on the integration of existing theories, byintroducing the voting behavior of independent director in the board of directors,explores the effectiveness of independent director with overseas background morecomplete. Third, based on the board of directors’ team heterogeneity, this studydiscusses the influence factors upon the voting bahavior of independent directors withoverseas background, and enriches the existing research framework.