| Board of directors as the connection institutions between shareholders and managers, is both the ultimate controllers and the final decision makers of the company, therefore, the board of directors is the core of corporate governance. According to the legislation and rules of the various countries and institutions, it is the ultimate goal of corporate governance to construct an efficient board. The facts that the compliance of board governance has been improved significantly in China’s listed company but the efficiency is still low force us to transfer the starting point of board reform from the compliance to improving the performance of board governance. Board characteristics is one of the most important determinants of governance performance. Board characteristics influence governance performance through the behaviors of performing their functions. Therefore, it is significant for improving board governance performance to put the board governance performance as the guidance and study how configure the structure to guarantee that the board performs effectively. The GEM on which the high technology, high growth, young start-ups are listed is important strength of our country’s independent innovation. Compared with the mature large listed companies, these companies have some characteristics, such as lower principal-agent problem, resource scarcity, highly uncertain internal and external environment, and the board of directors has more motivation and ability to perform their functions. As a result, the influence factors of board governance performance are special. There are still some limits in relavent literatures. First, Governance performance is substituted by corporate performance and the measures of governance performance are not established in the current empirical studies which shinks the extension of governance performance and mixes the concept of corporate performance and governance performance. Second, Most of empirical studies of board governance follow the logic of "board characteristicsâ†'performance" and ignore the mediat effect of board behavior, which lead to the mixed research results. Third, most empirical studies focus on the relationship of variables from the point of view of linear but not nonlinear. Fourth, the studies of board governance of entrepreneurial enterprise are scarce. In this paper, based on the board characteristic of GEM companies, the board governance performance index of the listed GEM companies is first established and how the board characteristics impact the governance performance through the behaviors of performing their functions is studied from the point of view of nonlinear and therefore the determinants of board governance performance is studied.The board of directors achieves governance performance by governance behaviors of performing functions. Board behavior refers to the process of directors performing their functions and implementation of governance objectives. Combined with shareholder primacy theory, stakeholder theory and organizational control theory, the GEM listed company governance goal is to maximize the shareholder-oriented core stakeholders’interests through company innovation. Based on resource dependence theory, stewardship theory and agent theory, the board of directors realizes the goal of corporate governance by performing the strategy and supervision function. The board behavior can correspondingly be divided into strategic behavior (including provision of resources and strategic participation) and supervision behavior. Considering board supervision and strategic behavior is contingent, the board of the GEM listed companies may be more involved into the operating level to supervise, but the opportunism behavior of the executive, especially the level of financial disclosure supervision is low. The level of provision resources behavior is higher and strategy behavior is more positive and is not only involved in strategic level but also deep into management boundary, so that the integration of participation in strategy and management of board in the GEM listed companies is stronger.Board governance performance is the effect of board carrying on strategic and supervision behavior to perform function and the board governance performance eventually embodies in the realization degree of the governance goal. Based on strategic and supervision behavior, the board governance performance can be divided into strategic behavior performance and supervision behavior performance. Strategic behavior performance refers to the effect of board strategic behavior to perform strategic function. The board strategic behavior performance indicators include at least the organizational innovation, shareholder wealth, social responsibility, bankruptcy risk avoidance etc. Supervision behavior performance refers to the effect of the board’s monitor and control behavior on managers, whose indicators include at least the agency cost and efficiency, and the quality of information disclosure, violations avoidance, etc.According to the SCP paradigm of industrial organization theory, the influence of board characteristics on governance performance is not a simple and direct, but through the board behavior. The board characteristics such as structure, demographic characteristics and human capital influence the motivation and ability of board performing functions, and thus affect the strength of the board’s strategy and supervision behavior. Further, the board of directors affects the strategy behavior performance—company innovation, shareholders wealth, social responsibility and bankruptcy risk avoidance through behaviors of resources provision and strategic participation; By means of the board supervision behavior, supervision behavior performance such as agency cost declination, improvement in quality of information disclosure, and violations avoidance is affected. There are double paths that board characteristics impact governance performance:"the board characteristicsâ†'strategic behaviorâ†'strategic behavior performance" and " the board characteristicsâ†'supervision behaviorâ†'supervision behavior performance".From the nonlinear view, based on the characteristics of the GEM listed companies, research hypotheses about board characteristics influence board behavior, behavior impact governance performance and board behavior mediates the relationship between board characteristics and governance performance are put forward in this paper. Usin board governance performance indicators as dependent variable, board characteristics as independent variable, board behavior index as a mediation variable,509GEM listed companies in China for the three-year period of2009-2011as research samples, using nonlinear mediation effect method, the above research hypotheses are tested.Because both the effect of board characteristics on behavior and behavior on governance performance are not linear but nonlinear, the mediation effect of board behavior is not constant, but varies with different values of board characteristic, that is, board characteristics generate an instantaneous indirect effect on governance performance through behavior. The latest scientific method to test nonlinear mediation effect which is put forward to by Hayes and Preacher (2010) is used to estimate indirect effects in an Xâ†'Mâ†'Y causal system that allow the relationships between causal agents and outcomes to be nonlinear. MEDCURVE for SPSS statistical software is used for data operation. Sepcifically, OLS regression is used for estimate the coefficients of board characteristics influencing the board behavior and board behavior impacting governance performance; bootstrapping is performed for confidence interval and the significance of instantaneous indirect effect of board characteristics on governance performance through behavior is tested.Using the sample of GEM listed companies in China, this paper draws the following conclusions through empirical research:first, board characteristics of the GEM listed companies have a significant effect on board behavior; the influence of different characteristics on board behavior may be nonlinear or linear. The influences of board structure on board behavior are as follows:the relationship between the size of the board of directors and board behavior is a negatively logarithmic curve, the relationships between proportions of independent director, director equity incentive and board behavior are U-shape relationship. The influences of board demographic characteristics on board behavior are as follows:the proportion of women directors positively relates to board behavior, average age of directors shows a negative logarithm curve relationship with board behavior, the average education degree has no effect on board behavior. In terms of human capital of board effect on the board behavior, proportion of venture capital directors is negatively related to board behavior; proportion of founder directors especially the ratio of internal founder director is positively related to board behavior, but outside founder directors is not related to board behavior; the relationship between average tenure of board and board behavior is positive.Second, board behavior of GEM listed companies has different effects on strategic behavior performance and supervision behavior performance. The relationship between board behavior and each strategy behavior performance—R&D investment, ROE, Tobin Q, growth rate of total assets, bankruptcy risk is a positive logarithmic curve, which shows that with the increase of board behavior strengthens, the board strategic behavior performance has improved; however, with the deduction of negative effects of board excessively performs strategic function, the rate of increase of strategic behavior performance will be more and more slowly. The relationship between board behavior and agent efficiency and the first type agency cost is a positive logarithmic curve, which shows that with the increase of board behavior strengthens, agent efficiency has improved and the speed of improvement is gradually slow, and the first type agency cost has reduced and the speed is slow. However, the board behavior and the supervision behavior performance indexes such as the second type agency cost and the quality of information disclosure has no correlation. The above conclusions show that board behavior in the entrepreneurial enterprises mainly manifests in providing resources and strategies involvement; but the supervision behavior is weak, which provides the support to the cooperation model between board of directors and managers.Third, board behavior nonlinearly mediates the relationship between board characteristics and strategic behavior performance. Board structure, the proportion of women directors and average age of directors as well as various indicators of human capital have a significant effect on strategic behavior performance and parts of supervision behavior performance indicators such as agency efficiency, the first type agent cost. Because the relationship between some board characteristics and behavior is the U-shape or logarithmic curve, meanwhile, the relationship between board behavior and strategic behavior performance, agent efficiency, the first type agent cost is a logarithmic curve relationship, the mediation effect of board behavior between board characteristics and governance performance is not a fixed, but varies with the different values of board characteristics, that is, the instantaneous indirect effect of board characters on governance performance through behavior exists. Board behavior is not the mediator between board characteristics and supervision behavior performance indexes such as agency cost, information disclosure, etc. These conclusions suggest that we will make unstable and even wrong conlusions if we ignore the mediator variable and directly studying the relationship between board characteristics and performance in board governance empirical research. This paper has the following contributions:(1) the establishment of double path model of "board characteristicsâ†'strategic behaviorâ†'strategic behavior performance" and "board characteristicsâ†'supervision behaviorâ†'supervision behavior performance" deepens the SCP paradigm and enriches the research framework of board governance;(2) the establishment of measurement indicators of board governance performance is helpful to provide theoretical support for measuring the board effectiveness from the view of the performing effect of board functions;(3) the method to test nonlinear mediation effect which Hayes and Preacher come up with in2010is firstly used in the study of board governance to test instantaneous indirect effect of board characteristics on governance performance through behavior. It establishes nonlinear logic which is different from previous research of linear logic and improve the empirical methods in the board governance research;(4) the study of the distinctiveness of the influence path of board characteristics on governance performance through behavior in the context of entrepreneurial enterprises enriches the literature of corporate governance in entrepreneurial enterprises, as well as contingency thought in use of board governance. |
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