Research On The Relationship Between Firm Performance And Board Structure Of Chinese Public Company

Directorate function is the core issue of inner corporate governance, management power of a corporation is typically centralized in board of directors who establish company policy and is elected by the stockholders. A good board structure reflects its efficiency of management in modern corporations. To increase efficiency in management and the governance of a company, its structure is the main component. Does a board structure really have an influence function in firm performance? Scholars and business management organization in many countries have always continually focused on it .How to establish a better board structure is the hot point of research .This thesis studies the relationship between the structure characteristics of board of directors and firm performance. Using EPS as the measure of firm performance, the thesis finds some interesting results in the sample of 3153 companies listed on the Shanghai and Shenzhen Stock Exchange during the period of 2003-2005. The conclusions are as the follows: Firstly, the number of director doesn't have an effect on the company's performance. Secondly, the proportion of independent director has positive effect. Thirdly, whether the board chairman and the General Manager are separated or not doesn't has an effect. Fourthly, the ratio of directors'shareholding has positive effect but the ratio of shareholding directors doesn't. Fifthly, pay of the independent directors has positive effect. Sixthly, the special committee of board of director doesn't have positive effect on firm performance, which is unexpected. In order to find out whether these structure characteristics that are not proved to be effective to firm performance above have a lagging effect, I do a lagging test, but get the same results.The innovation and contribution of the thesis are as follows:First, in the choice of explanatory variables, I consider not only the normal variables, that is the number of director, the proportion of independent director ,whether the board chair and the General Manager and the ratio of directors'shareholding , but also the pay of the independent directors and the special committee of board, which weren't considered in previous studies.Second, I did a test on whether these structure characteristics that are proved to be not effective to firm performance above have a lagging effect. Also there is no previous similar study before. But the results proved again that these explanatory variables haven't an obvious influence function on firm performance.Third, in the selection of the control variables, in order to guarantee the reliability of the conclusion of the study, I omitted some variables that are not effective by regression analysis.Fourth, I put forward a number of policy proposals based on empirical study. Modern enterprises should focus on the improving of the corporate governance, specifically from the following aspects: 1.Ensuring the importance of the Board in Corporate Governance, strengthening the role of the Board. 2. Improving the system of the independent directors further. 3. in different circumstances, it can be different whether the chairman and general manager should be separated. 4. Improving the company directorship shareholding system further. 5. Perfecting the system of special committees of the board gradually.