Study On Relationship Between Board Of Directors’ Governance And Internal Control Effectiveness From The Listed Commercial Banks

The international financial crisis led to the globalization of financial reform, with the increase of capital market opening makes our country commercial bank in an increasingly competitive integration and internationalization. Economy under the background of new and old normal alternating in our country, our banks’ are facing loan growth is stabilizing, spreads narrowed, non-performing loans rebound, interest rate marketization process accelerated, the Internet financial boom, multiple mixed financial risk pressure and etc. At the same time, the national strategy of "One Belt One Road" brings to the commercial bank the opportunity to improve the status of international. Commercial Banks in China is facing the dual challenges of the opportunities and risks coexist. It’s governance ability and internal control system of commercial bank put forward higher requirements. Because of commercial banks’ particularity, its corporate governance rely more on internal governance, and the board of directors as the core of corporate governance, size and the proportion of independent directors, the degree of separation of audit committee, behavioral characteristics, such as level of quality to a great extent for the board of directors, determines the bank internal management ability and defensive ability, directly affects the bank internal control system established and implementation effect. But nowadays there exists many problems such as insider controller of commercial banks, the boards lack of utility, the executive incentive mechanism is imperfect, and so on, which have seriously affected the effective implementation of the internal control. How to perfect the board of directors governance mechanism, so as to improve the ability of bank governance, ensure the implementation of internal control effectiveness has become the commercial banks to build international competitiveness have to think about problems. Therefore, in this paper, we study the relationship between the board of directors’ governance and the internal control effectiveness in commercial bank is great significance.In this paper, on the basis of analyzing the research status at home and abroad, according to the principal-agent theory, stakeholders theory, from the perspective of corporate governance, the contrast research general company and the influence of various internal and external environment of bank governance, found that the particularity of bank governance lies in its internal governance effect than on the outside. So we can’t use the general enterprise’s board of directors governance mechanism and effectiveness of internal control evaluation method to study the commercial bank. Then set out to differentiate from the board governance structure can fully represent the four structure including organization of the board of directors of board governance structure, behavior structure, incentive structure and quality structure as explanatory variables. Set the effectiveness of internal control evaluation is a reference to the banking regulatory commission in 2005 issued the trial measures on settling commercial banks’ internal control evaluation in the selection of indicators, through the factor analysis method and internal control effectiveness comprehensive index ICI and concrete four dimensions F1(profit), F2(security), F3(risk), F4(liquid) as explained variables. With 16 listed commercial Banks in China from 2008 to 2013 a total of 92 data as the whole sample, using descriptive statistics, correlation test and multiple regression model to examine the method of analysis to explore the board governance and internal control effectiveness and the specific dimensions of relationship.The empirical results show that the four board governance structure and internal control effectiveness and specific dimensions of existing universal relevance, the significant correlation of conclusions are:(1) the board of directors in the scale presents negative correlation with the internal control effectiveness, profitability, safety, risk index; The independent directors proportion is negatively related to the internal control effectiveness, safety index, and positive correlation with liquidity index; The audit committee separation degree presents positive correlation with the internal control effectiveness, safety indicators.(2) the number of the board of directors’ meetings are negatively related to the internal control effectiveness, profitability index, and positively related to the liquidity indicators; The chairman change presents positive correlation with liquidity index.(3) The total compensation of top three directors is negatively related to the safety index, and positively related to liquidity index; At the end of director holdings are negatively related to the risk index, and positively related to the liquidity index.(4) the average age of board is positively related to the profitability indicator, and negatively related to the safety index; The education background of Chairman is positively related to the profitability indicator. This paper argues that the board of directors governance structure in different aspects and different degree associated with internal control effectiveness. State-owned Banks, joint-stock commercial Banks, city Banks in internal control effectiveness and profitability, liquidity, security, risk four dimensions on the performance of each are not identical. Finally, according to the above empirical results are analyzed and explained, and put forward some suggestions to perfect the board of directors’ governance structure in order to improve the effectiveness of internal control.