Emirical Research On The Relation Between Corporate Board And Performance Variability

The relation between characteristics of corporate boards and firm performance continues to be a fundamental issue in the corporate governance literature. Prior studies of this relation focus on levels of corporate performance, paying little attention to performance variability. Though this paper study the relation between characteristics of corporate boards and firm performance, we have some difference, i.e. we use performance variability as our regression model's explained variables and investigate the relation between characteristics of corporate boards and performance variability over a long period. So, this paper extends prior study by documenting relation between characteristics of corporate boards and performance variability. This paper may provide some important reference for improving corporate governance level, enhancing the efficiency of the board of directors and so forth.This paper use China's Shanghai and Shenzhen A-share listed company data as the study sample, and refer to domestic and international research on enterprise performance volatility, empirically analysis the relationship between characteristics of board and performance variability. The main findings are as follows:1. The board size. Board size was negatively correlated with performance variability. With the expansion of board size, the final decision-making is more compromise and equalized cause board members will be communication and coordination among the decision-making process. Therefore, a large board size more inclined to compromise and make decisions that tend to not very good and nor very bad. As a result, the larger board the smaller performance variability.2. The proportion of independent directors. The relationship between the proportion of independent directors and performance variability is insignificant. While the independent directors can provide one mechanism to supervise the business and to reduce the performance variability, but due to have established the mechanism until June 30th,2002, the CSRC promulgated the guidance to establish the mechanism of independent director of listed companies. A number of listed companies did not pay attention of the role of independent director on corporate governance until the guidance promulgated. But overall, the mechanism of independent directors did not fully play its proper role in corporate governance.3. Duality of chairman and general manage. Duality of chairman and general manage is positively correlated with performance variability. Duality of chairman and general manage would clearly strengthen the control and the authority of the chairman. Makes the chairman (General Manager) has relative to other members of the board of directors a greater influence. In a most important decision-making by the chairman of the companies, the risk of errors from their judgments would not be well dispersed. In other words, a chairman of a crucial influence on decision-making in enterprises, there are very bad or very good probability that the decision-making will be even greater. Therefore, duality of chairman and general manage is positively correlated with performance variability.4. The percentage of shares held by the Chairman. The relationship between the Percentage of shares held by the Chairman and performance variability is not clear. On the one hand, as chairman of a high proportion of shareholding, it will strengthen its authority in the executive team, which further enhances the authority of the chairman to make Chairman (General Manager) has relative to other members of the board of directors a greater influence, so that corporate performance more variability; the other hand, the higher the chairman of holding their own vested interests in order to maintain and thus in order to maintain price stability, but also refused to high-risk high-yield projects, thereby reducing the performance variability.