A Research On Management Background Characteristics And Financial Risk Of Enterprises

With the growing development of China’s market economy, the damage of financialrisk of a company is increasing rapidly. It is not only affects the survival and developmentof a company, but also has brought great loss to the shareholders. Therefore, it issignificant to do a research on the major factors of financial risk of a company.Due to the separation of ownership and control, managers control the company inpractice. Managers’ behavior decide the company’s strategy. However, managers are notalways rational and it’s behavior decided by personal overconfidence, short-sightedbehavior and prejudice which belong to the psychological deviation that connect to theindividual management background characteristics. Therefore, we can manage to do theresearch from the viewpoint of management background characteristics. It is theoreticallyand practically significant to decrease the financial risk.Based on the upper echelons theory, this thesis analyze the relationship between themanagement background characteristics and financial risk of enterprises by usingfinancial leverage. A linear model is established from two aspects of the managementteam background characteristics and CFO’s background characteristics of empiricalresearch using the data of Chinese listed companies from2008to2012. Our researchdemonstrate that different gender, age, education, tenure and education background ofa management team has had a certain impact on the financial risk of a company. So doesthe CFO. These findings open the view of the former research. The results of thisstudy examines the relationship between financial risk of enterprises andmanagement background characteristics. This paper also contributes to human resourcesmanagement as well as avoid the financial risks of enterprise in practice.