The Empirical Research On Independent Directors And Company Performance Based On The Analysis Of Preventive Effect Of Tunneling By Major Shareholders

The independent director system has been widespread at domestic and abroad as important content of corporate governance. The independent director system is designed to solve the principal-agent problems in the process of company’s business, and achieve the goal of improving corporate performance As known, when the enterprise ownership and management rights separate from each other, the entrusted agency cost is produced due to asymmetry of information on the owner and operator. The first kind of agency problem is the conflict of interest between shareholders and managers, the second is a conflict of interest between major shareholders and minority shareholders. In China, due to the lack of the mechanism of supervision and balances, and the characteristic of the listed companies "a dominant" ownership structure, the insider control phenomenon is seriously existed. Using its advantages to seek private interests by Major shareholders not only infringes the interests of medium and small shareholders, but also damage to the enterprise value. Major shareholders often make various decisions from the perspective of their own interests because of the advantage of disposal rights, regardless of small and medium shareholders’ interests. They will damage the interests of minority shareholders on business decisions and interest distribution. For this, the introduction of the independent director system is more considerately to prevent major shareholders embezzle the interests of the company.The independent director system has been more than ten years since introduced into China in2001, the domestic study of independent director mainly are about whether the independent director system is effective and what factors that the effectiveness of the independent director system is affected by. Therefore, domestic scholars mainly study the relationship between independent directors and corporate performance from the aspects of the ratio of independent directors and the characteristics of independent directors. Three different conclusions are drawn:the relationship between independent director and performance is positive, negative and unrelated, there is no unified conclusion on the relationship between the two academic circles. While in the process of implementation the independent director system highlight its role with the improvement increasingly in China, but it still has a lot of questions, the phenomenon of tunneling by major shareholders through occupation of fund, affiliate transaction and so on which damage enterprise value. For example, the major shareholders of HONGLEI took up463million Yuan of bill receivable and occupied the interest of11.2063million Yuan and took up a total of474million Yuan in2012; Sichuan Lutianhua Co., Ltd and Shenzhen Sunyes Electronic Manufacturing Holding Co., Ltd were punished by regulatory authorities because of illegal occupation by major shareholders of financial penalties. Thus, it is still needed for in-depth study on independent directors in order to examine its effectiveness. Based on this, taking Shanghai and Shenzhen A-share listed companies in2007-2011as samples, combing the relevant literature on the basis of the independent directors, this paper makes the corresponding assumptions between independent directors and tunneling by major shareholders and the enterprise value. By building related models and using the empirical regression analysis, this paper examines the influence of the proportion, gender, age, salary, accounting background of independent directors on corporate performance, and demonstrates the mechanism of independent directors, tunneling by major shareholders and the enterprise value. The results show that:first, the proportion, salary, accounting background of independent directors significantly affect the enterprise value. Greater independence of independent directors, more independent directors with accounting background, higher salaries, better corporate performance. Secondly, he proportion, salary, accounting background of independent directors significantly affect tunneling by major shareholders, Greater independence of independent directors, more independent directors with accounting background and higher salaries can be effectively suppressed tunneling by major shareholders. Thirdly, tunneling by major shareholders significantly affect enterprise value, tunneling by major shareholders reduced enterprise value. Finally, tunneling by major shareholders plays mediating effect between independent directors and corporate values.