A Study On The Effectiveness Of Independent Directors System

It's a decade that IIS had been introduced in china stock market, which effectiveness of IIS is questionable, and reform of IIS should be carried on soon. So it's necessary to do a study on the effectiveness of IIS and to explore the existing problems in implementation, which is significantly meaningful to improve the IIS, to promote the healthy and keep stock market developing stably.Drawing on the basis of research results at home and abroad, firstly this paper theoretically analyze the game behavior between large shareholders and dependent directors in decision of related party transactions, and then draw a conclusion that it is need to improve the independence of independent directors and to strengthen the external supervision. Subsequently, this paper takes listed-companies in shanghai stock market from 2002 to 2006 as sample, uses fixed effect model,random effect model and multiple linear regression model for empirical analysis, finally draws some conclusions as follow:IIS still not play an effective role in corporate governance at present, it didn't show a significant negative correlation between IIS and related party transactions, it didn't show any significant differences on the efficiency of IIS between active companies and passive companies. The IIS does not improve corporate performance on the whole. According to the theoretical analysis and empirical research findings, combining with the characteristics of China stock market, we give some corresponding advice and suggestions as follows:to carry out equity reform and lower ownership concentration, to increase the rate of independent directors on the board of Directors, to establish the Standing Committee of independent directors and independent directors associations, to perfect the reputation mechanism of independent directors, to strengthen the external supervision and penalties and so on.