An Empirical Study On The Relationship Between Board Structure And Firm Performance: Based On The Endogenous Perspective

In recent years, the relationship between board structure and firm performance has become focus both in the domestic and international academics. In the corporation which has modern enterprise system, because of the division of ownership and rights, it is hard to ensure that directs always maximize shareholder benefits during their power using. Then agency problem has raised, in this situation, board of directs is the basic approach to solve this conflict. Although the literatures that research this issue are increasing, there is no consistent conclusion both in theoretical and empirical research.In this article, we believe that the scholar before ignore the importance of the endogenous characteristics of board structure. With our market economy has improved step by step, many enterprises in the domestic will step forward to normalization gradually. Then, board institution will play more and more important role in the modern corporate governance. So the research based on endogenous perspective to analyze the relationship between board structure and firm performance has practical significance.During the empirical analysis, we select 345 industrial listed company 5 years panel data as the sample, and apply simultaneous equation model to analyze the endogenous effect between board structure and business performance. In the equation estimation, we apply two methods, OLS and GMM, meanwhile we make a comparative analysis of two methods.This paper totally includes six chapters and each chapter as follows:ChapterⅠis the introduction, in this chapter roughly proposed research purposes and significance of this paper. Meanwhile we indicate three main contents——the endogenous effect between board size, independence and firm performance.ChapterⅡis a comprehensive literature review on the issues to be studied. First of all, review the theory of board governance. Moreover, review two explanations of the literature before, equilibrium explanation and out-of-equilibrium explanation, raised by Hermalin and Weisbach. Then, from the point of equilibrium phenomenon, we briefly review the empirical analysis of literature which based on endogenous perspective.ChapterⅢ, in this chapter we indicate data source and sample selection. We select CSMAR database as the source, and explain the specific course that how we get the available data.ChapterⅣbuilds the framework and theoretical model. Section one indicate the reason that why we select this variable as the endogenous and exogenous variable. Section two propose the appropriate hypotheses, and build the simultaneous equation model.ChapterⅤis the empirical analysis and results explanation. Basing on the theoretical model, we make a descriptive analysis firstly. Then we use GMM (generalized method of moments) and OLS (Ordinal Least Square) to estimate the simultaneous equation model, we also make a comparative analysis of two methods, and finally explains empirical results.ChapterⅥis the conclusion of this paper, contains conclusions and the further research. Basing on conclusions of empirical analysis, this chapter put forward the corresponding policy recommendations, and proposes the inadequacies of this study and follow-up research.The main conclusion of the empirical analysis is apt to support agency theory:1. The relationship between board structure, mainly refers board size and board independence, and performance ROA has an endogenous characteristic. If we ignore this feature and make research from exogenous perspective, we will get a wrong conclusion.2. One hand, the board independence is higher, the firm performance is better. The other, the relationship of board size and firm performance is over "U" type, the optimal size is about 9-11 directs.3. The impact of the independence to board size is significantly negative; the size of the board which has high independence is relatively small.4. Shareholders' controlling force, the variable Z in this article, impact on board of directs is not significant. But we believe that it is not mean shareholding structure has no influence to board of directs.5. Accounting measures of performance are better predictors of list company's performance than stock price performance. Because stock price of performance contains many "noise information"Comparing with the research before, this paper is characterized by:1. We apply GMM as the method in the equation estimation. GMM can eliminate the serial correlation between equation and heterogeneity in the cross-section data. It is a big progress compared with the method Two-Stage-Least-Square and Three-Stage-Least-Square which is applied by many scholars in the research before.2. In consideration of the variable endogeneity, we induct the quadratic term of the board size in the equation to survey whether there exist the optimal board size or not. In the literature before, many scholars usually induct the quadratic term of the board size in the singular equation model, without try in the simultaneous equation model.There are some improvements in this paper. Firstly, we select 5 years panel data as the samples, but not use panel data model, only build SEM to deal with endogeneity. In the further study, building SEM based on panel data method is a feasible improvement. Secondly, with the research tendency develop in this field, our study contents can expand to the whole board governance mechanism.On the whole, based on the empirical analysis, this article analyzes the endogenous problem of board mechanism in our country's corporate governance. These works, to improve our country's corporate governance, have its theoretical and practical significance.