The Corporate Governance Effect Of The Appointment Of Supervisors In Listed Firms

According to the second review draft of the revised company law(2023),the supervisory board will become the elected body of Chinese companies,and companies where the audit committee exercises the powers of the supervisory board may not have a supervisory board or supervisors.Cancelling the supervisory board and further strengthening its functions have become two opposite paths for listed companies to choose from.However,due to factors such as legislative conflicts and differences in the functions of alternative institutions(audit committees)caused by the cancellation of the supervisory board,the supervisory board will continue to be an important lever for shareholder supervision.Listed companies face difficulties in managing the selection and appointment of part-time supervisors in their corporate governance practices.In recent years,there has been a phenomenon of supervisors of listed companies concurrently holding positions in multiple companies.According to statistics in this article,in 2021,18.8% of supervisors of listed companies in China concurrently held positions in more than one company.There are two different views on the governance effect of concurrent appointment of supervisors in existing theories.These concurrent appointment of supervisors can bring negative lack of supervisory energy to companies,as well as positive sharing of performance experience.Listed companies face management difficulties in selecting and hiring more or fewer supervisors in corporate governance practice.The dilemma of traditional supervisor selection management requires innovative management optimization measures to solve in the new era.In recent years,some stateowned holding groups have explored the implementation of a full-time supervisor system.This optimization policy for supervisor selection focuses on promoting the professionalization and specialization of shareholder representative supervisors in stateowned listed companies.While strictly limiting the number of supervisors concurrently,it strengthens the construction of a mechanism for cultivating the professional ability of supervisors,and establishes supporting measures such as the independence and power status of supervisors,which has conducted beneficial explorations to alleviate the difficulties of supervisor selection management.However,due to the inherent lack of investor supervision in state-owned enterprises,there is still theoretical ambiguity as to whether this optimized policy for supervisor selection can exert its governance effect.In this regard,using normative analysis methods and grounded methods,taking opportunism behavior of management as a research perspective,based on social network theory,limited attention theory,high-level echelon theory and principal-agent theory,this paper proposes a governance effect analysis framework for part-time supervisors and their selection optimization,and explains the internal mechanism of how the number of part-time supervisors and their selection optimization affect the functioning of the board of supervisors.On this basis,based on the sample of A-share(state-owned)listed companies from 2003 to 2021,this paper uses ordinary least squares,propensity score matching model,instrumental variable method,multi time point double difference model and other empirical analysis methods to explore the causal relationship between the number of part-time supervisors and the selection and optimization of supervisors representing shareholders of state-owned holding groups on the management’s opportunism behavior,such as excessive perk consumption,financial irregularities and earnings management.Research shows that the average number of supervisory board members concurrently holds more positions,leading to a higher level of excessive perk consumption,a higher probability of financial violations,and a higher level of accrued earnings management in listed companies.These effects are more significant in the sample of state-owned listed companies,but the number of supervisory positions has no significant impact on the degree of financial violations in listed companies.Overall,the supervision function of supervisors in(state-owned)listed companies relies more on the protection of supervisory energy,and strict restrictions on the number of supervisors concurrently serving can help improve the quality of performance of supervisors in(stateowned)listed companies.The optimization measures for the selection of shareholder representatives and supervisors in the holding group have significantly suppressed the excessive in-service consumption level of state-owned listed companies,and to some extent,curbed the problem of state-owned asset loss.The research results of the mechanism indicate that the optimization of the selection of shareholder representatives and supervisors in stateowned holding groups suppresses the motivation of management’s excessive perk consumption by strengthening power checks and balances,and increases the exposure opportunities of management’s excessive perk consumption by improving information transparency.Heterogeneity analysis shows that an excessively high age weakens the inhibitory effect of optimizing the selection of supervisors on excessive perk consumption.Further research shows that optimizing the selection of representative supervisors of controlling group shareholders has a more significant impact on excessive perk consumption of non-state-owned shareholders with lower shareholding ratios,local stateowned enterprises,and state-owned enterprises belonging to monopolistic industries.The optimization measures for the selection of shareholder representatives and supervisors in the holding group have suppressed the probability and degree of financial irregularities in state-owned listed companies.The research results of the mechanism indicate that the optimization of the selection and appointment of shareholder representative supervisors in state-owned holding groups reduces the opportunities for financial violations by management and increases the likelihood of financial exposure by improving the activity of the supervisory board and internal control quality,thereby suppressing financial violations.Heterogeneity analysis and further research indicate that for local state-owned enterprises with relatively weak institutional construction and monopolistic industry enterprises with poor external governance environment,the optimization of shareholder representative supervisor selection in state-owned holding groups has a more significant inhibitory effect on financial violations;The effect of fulltime supervisors with younger age and financial background in suppressing financial violations is more significant,and the optimization of supervisor selection also plays a governance role in business violations.The optimization of the selection of shareholder representatives and supervisors in the holding group significantly suppressed the earnings management behavior of stateowned listed companies.Mechanism analysis shows that the optimization of shareholder representative supervisor selection measures in state-owned holding groups restricts the earnings management behavior of state-owned listed companies by suppressing management’s myopic and agency motivations.Heterogeneity analysis and further research indicate that for state-owned listed companies in areas with weaker supervisory environments and listed companies in competitive industries with greater room for earnings data manipulation,the optimization of supervisor selection has a more significant inhibitory effect on earnings management;Full time supervisors with financial backgrounds have a more significant effect in suppressing financial violations,while older full time supervisors weaken the policy effect of optimizing supervisor selection.The innovation points of this study are mainly reflected in the following two aspects:firstly,this article takes supervisors as the research object,and constructs a theoretical analysis framework for the governance effects of supervisor concurrent behavior from multiple perspectives of "energy hypothesis","incentive hypothesis",and "ability hypothesis",providing a feasible explanation for understanding the effectiveness of supervisor concurrent supervision in listed companies in China,This also provides empirical evidence for a more objective understanding of the concurrent act of supervisors in listed companies in China.The research conclusion of this article shows that the fewer supervisors hold concurrent positions,the lower the level of excessive perk consumption,the probability of financial violations,and the degree of earnings management.This provides empirical evidence for a more objective understanding of the phenomenon of supervisors holding concurrent positions in listed companies.Secondly,based on the institutional background of China,this paper defines the optimization path of the whole process management of the selection of supervisors in listed companies,which "takes the energy and ability to perform their duties,independence,and power status as the route",and provides direct empirical evidence support for the governance effect of the optimization policy of the selection of shareholder representative supervisors explored by existing state-owned holding groups.This study found that the main content of the full-time supervisor system explored and implemented by the holding group is to select and hire full-time supervisors,strictly restrict their concurrent positions,and supplemented by supporting management mechanisms such as enhancing professional competence,maintaining the independence of supervisors,safeguarding their power status,and optimizing the performance process.This optimized policy for supervisor selection has significantly improved the supervision effect of the supervisory board of state-owned listed companies,This provides empirical evidence for a more objective understanding of the governance function of state-owned enterprise supervisory boards.