Media Negative Coverage Influence On The Positive Behavior Of Independent Directors

With the development of economy and society, the independent director system has been widely used in Western countries, and it has become an integral part of corporate governance. With the development of economic globalization, China has also introduced the system of independent directors in the year of2002, and independent directors’issues are also increasingly prominent. Through the research of independent directors of Chinese listed companies, we test whether negative coverage will promote positive behavior of independent directors and examine whether it plays the role in the mechanism of reputation.In this paper, based on A shares of non-financial listed companies in China from2005to2010, we analyze the impact of negative media coverage on the behavior of independent directors, including whether the independent directors object and independent directors meeting attendance rate. Media includes CNKI full-text database of Chinese major newspapers from2004to2009, and all the negative reports are about non-financial listed A-share companies. Research methods are statistical analysis and comparative analysis, by contrast negative reports and market-oriented policy-oriented newspaper reports, we study the impact of two kinds of papers’negative reports on the positive behavior of independent director of listed companies, on the other hand by comparing the state-owned enterprises and private enterprises, we analyze negative media coverage of the different nature of the business impact on independent directors positive behavior.We find that this six-year period from2004to2009, for all A shares of non-financial listed companies, there are4433negative reports, including2514policy-oriented newspaper reports and985market-oriented newspaper reports. The empirical results show that positive behavior of independent directors is related to negative reports significantly, but in the listed companies whose independent directors’reputation is different, there is no significant change in the impact of negative reports on the independent directors’positive behavior, indicating that the media coverage plays an active role on the independent directors’positive behavior, but it does not affect independent directors’behavior by the reputation mechanism. Compared to Western countries, maybe because Chinese emphasis on the reputation of independent directors is not high enough, and the country is in economic transition stage, companies are with Chinese characteristics, the impact of Chinese economic and political system by the reputation mechanism does not play a regulatory role. In addition, with respect to the market-oriented newspaper, policy-oriented newspaper negative reports have greater impact on the independent directors’positive behavior. This shows that the policy regime in China has relatively larger impact on the business, and it is also related to Chinese specific national conditions and relations. In the state-owned enterprises and private enterprises, the negative reports both affect the independent directors’positive behavior, which suggests that state-owned enterprises and private enterprises are the same, both are affected by negative media coverage.Because the independent directors’voting data is unique to Chinese listed companies, and the study is carried out under the background of Chinese system, so the empirical results of this paper can provide Chinese-style evidence for the study of international theorists on media monitoring capabilities, and it also provides recommendations for such economic restructuring countries as China that they should take advantage of the media, which can improve the efficiency of the board and corporate performance.The research perspective of this article is innovative, among the current domestic and international research on media attention and corporate governance, the few scholars study the impact of media attention on corporate governance from the perspective of independent directors’behavior. Moreover, although previous studies have shown that negative media coverage can promote independent directors’ resigned behavior, and it noted the importance of reputation mechanisms, but did not further empirically test whether the reputation mechanism played a regulatory role. In this paper, combining with our special political and media monitoring system, we test the negative media coverage does not affect the behavior of independent directors actively through reputation mechanism.Since the data is difficult to obtain, measurement of media attention in this article uses the news reports data only in full-text database of Chinese major newspapers. In the subsequent study, we wish they can add network news reports and journals platform to have more accurate measure. In addition, the report does not classify content, with different content and the depth of coverage, the degree of influence on the behavior of independent directors will be different. Therefore, further research will classify media coverage and the depth of content to have a more accurate study of media coverage and the independent directors’behavior.