Studies On A Board's Effectiveness In Monitoring Role

Boards which are considered to be on the top of the internal governance mechanisms play more and more important role in the developing of a corporate. How to build and maintain an effective board of directors has become the key problem among the corporate governance mechanisms. A board's effectiveness means a board's effectiveness in monitoring role in fact, this paper studies the topic on a board's effectiveness in monitoring role in theoretical and empirical work. Firstly, I set forth what is the mean of a board's effectiveness in monitoring role, and analyze different kinds of directors' behavior before showing the relationship between board characteristics and the board's effectiveness in monitoring. Board characteristics include board composition characteristics, the chairman characteristics of the board and the independent directors' pay characteristics. Then I analyze the relationship between board characteristics and the board's monitoring performance on a sample of companies listed on the Shanghai or Shenzhen Stock Exchange. All my empirical evidence doesn't in favor of the conclusion of the relation between board characteristics and the board's monitoring performance by theoretical analysis. This result indicates that our corporate boards aren't effective in monitoring role, and need to be improved. Finally, I give some advice for improving our corporate boards' effectiveness in monitoring.