Empirical Study On The Influence Of External Corporate Governance To Financial Risk

Financial risk is an important subject in the study of economic management, and corporate governance is also an important subject in the study of economic management. More and more scholars are paying attention to the combination of the two subjects and begin to do research in them. However, corporate governance is divided into the internal governance and the external governance, the current scholars mainly focus on the influence of the internal governance to financial risk, and make very little research on the influence of the external governance to financial risk; But as the environmental basis of the internal governance in order to play the role, the external governance can not be ignored in producing the influence on corporate financial risk. Therefore, through introducing more external governance factors, studying the influence of the external governance to corporate financial risk will be of great significance.At the beginning, this paper makes a definition on the concept of external governance and financial risk, and introduces three theoretical basis:principle-agent theory, a comprehensive risk management theory, stakeholder co-governance theory, then, this paper makes the relevant analysis from the market environment governance mechanisms and stakeholders governance mechanisms which are consist of nine aspects in external governance and proposed nine assumptions, and the2010China Shenzhen and Shanghai A-share listed company data are selected as the study sample, the paper makes an empirical study by a multiple linear regression model and inspects the important influence of external governance to financial risk. The result of the regression analysis shows that:competition in product markets, competition in the control right markets, the governance of legal environment, the firms’ audit costs, the trust of supplier and the support of customer have a significant correlation with corporate financial risk, and they produce an important influence on corporate financial risk; The development of regional financial markets, the political relationships and the employee participation have no significant correlation with corporate financial risk, and they produce little influence on corporate financial risk. At last, on the basis of analysis in the empirical results, combined with china’s actual conditions, the author proposes six aspects’ relevant suggestions as follows: strengthen the risk management in competitive products market, strengthen the legal environment in governance, rationalize the relationship between corporate and government, strengthen the external audit constraints, improve the interaction mechanism of enterprises with their suppliers and customers, establish and improve the mechanism of employees involved in the supervision. This paper hopes to provide a reference to improve the external governance of listed companies in China and the prevention of corporate financial risk.