The Empirical Study On The Relation Of Independent Directors’Social Capital And Enterprise Performance

Market-oriented system has developed later than the western countries, which leads to many imperfections of its own. The ownership and management of corporate are separated from each other. For investors, they employ experienced employees to operate their enterprise. It triggers agent problems, and it contains two aspects. On the one hand, it manifests contradiction between investors and managers. On the other hand, it reflects conflict between large shareholders and minority shareholders. The large shareholders control the business, but minority shareholders cannot participate in managing. In order to solve this problem, it is important to introduce a control mechanism. So the independent director system has been introduced. It provides more independent and effective regulatory regime for the existing listed companies. The Commission formally issued "Guidance on how to establish independent director system in listed companies". It contains that listed companies must employ at least one accounting expert.The theory of independent directors has been a hot topic in academia. Breaking through previous research ideas, This study is inspired from the perspective of the independent directors’social capital. We analyze the concept, function and mechanism of the entrepreneurial social capital, combined with the reputation mechanism. Analyzing the theory of social capital, entrepreneurship theory and reputation hypothesis, this article investigates the impact of independent directors’social capital on enterprise performance.To make this article more convincing, We adopt theoretical method as well as the empirical one. We select some samples from Small and Medium Listed companies on the Shenzhen Stock Exchange in2008—2010. Choosing these samples is to study the independent directors’social capital in small enterprises. This paper selects4485samples. The data are manually collected from CSMAR database and Sina Finance. We define and measure the independent directors’ social capital from two angles:one is the characteristics of the social network of independent director, the other is the ability to mobilize this network of relationships. The interactive net of independent directors is defined as the horizontal network of relationship, vertical network of relationship and reputation. The remaining part of this article is organized as follows:Chapter Ⅰ:Introduction. This part is to put forward to analyze problems, including research background, significance, and outlines the specific research methods of this article.Chapter Ⅲ:Literature Review. This part has combed the literature on social capital and independent directors.Chapter Ⅲ:Theoretical analyses. This part analyzes entrepreneur theory, social capital theory and the independent director system theory.Chapter Ⅳ:Business performance and independent directors’social capital: A theoretical analysis and hypotheses development.Chapter Ⅴ:Empirical analyzes. This chapter describes sample selection, principles, data sources, and sets the variables and the main research model, and then analyzes the regression results and makes conclusions.Chapter Ⅵ:Conclusion, inspiration and future research implications. The main conclusions are as follows:(1)The most important finding is that the vertical network of independent directors is negatively correlated with corporate performance.(2) This paper considers the horizontal network of independent directors and finds that corporate performance has a significant positive correlation.(3)The qualification of independent directors and corporate performance are positively reacting to each other, the tenure and the age of independent directors and corporate performance is negatively correlated.There are two aspects of innovation in this study. One innovation is the research perspective. Another innovation lies in the data we employ. Also, this paper has two contributions, it enriches the entrepreneurial theory and gives the recommendations for the improvement of the independent director system.In addition, this study gives a few recommendations for the independent director system in China. First, the selection of independent directors should not only be concerned about its reputation, but also be concerned about whether the independent directors are for the development of enterprises. Second, it is important to establish an effective independent director reputation mechanism.The article has some limitations that need to be improved and dig deeply in the future research. Firstly, the quantification of the independent directors’social capital did not form uniformly recognized standards. Secondly, this paper just verifies the data from Small and Medium Listed companies on the Shenzhen Stock Exchange in2008—2010. Future researches can select several years of data in the database in order to study the time series and Delay of the problem.