Does Standardized Board Reform Of Central State-owned Groups Improve Capital Allocation Effectiveness And Investment Efficiency?

"On the central state-owned enterprises to establish and improve the company’s Board of experimental work notice", which is issued in 2004 by the SASAC, served as a prelude to the Board reform and standardization of the central enterprises Group. And from 2005, when the Baosteel Group became the first company that had outside directors more than half of the corporate board of directors, to 2015, when the number of enterprises with normalized Board of Directors has reached 74, Reform of the Board has lasted for 11 years. However, there are no empirical study focused on whether this reform on the Board of Directors has effects.Existing studies and researches about this reform are concentrated on theoretical analysis and empirical data is not utilized, which suffers from the lack of credibility. This paper is based on the trend of the investment role of central state-owned enterprises, investigating the effect of the board reform to the allocation effectiveness of capital from the group to listed subsidiaries and the investment efficiency of the listed subsidiaries, as well as the trend of this effect as time goes on, in order to provide empirical reference to the future development of reform policies of board, and examine the effectiveness of the bull market due to the reform from the perspective of state group board of directors reform. Therefore, the key problem of this paper is:Compared to the central state-owned enterprises that did not conduct the board reform, will the capital allocation effectiveness of the group and the investment efficiency of the listed subsidiaries of the central state-owned enterprises that conducted the board reform significantly improved? Specifically, this paper will focus on the analysis of the following three questions:1) Compared to the central state-owned enterprises that did not conduct the board reform, will the capital allocation effectiveness of the group of the central state-owned enterprises that conducted the board reform significantly improved? In the different batches of reform, which batch performed best? 2) Compared to the central state-owned enterprises that did not conduct the board reform, will the investment efficiency of the listed subsidiaries of the central state-owned enterprises that conducted the board reform significantly improved? In the different batches of reform, which batch performed best? 3) As time goes on, how does the effect of this reform changed?And this paper finds:1) Compared to the central state-owned enterprises that did not conduct the board reform, the capital allocation effectiveness of the group of the central state-owned enterprises that conducted the board reform significantly improved. In the different batches of reform, the batch of 2013-2014 performed best.2) Compared to the central state-owned enterprises that did not conduct the board reform, the investment efficiency of the listed subsidiaries of the central state-owned enterprises that conducted the board reform significantly improved. In the different batches of reform, the batch of 2013-2014 performed best.3) The impact of this reform is not obvious in the first year, but obvious in the 2-5 years, the impact gradually disappears 7 years later.Innovation lies in the following three aspects:Firstly, this paper discusses the impact of the standardized board reform to the double internal capital market efficiency from the perspective of capital allocation effectiveness of the group and the investment efficiency of the listed subsidiaries of the central state-owned enterprises; Secondly, this paper examines that during the past ten years, the board carried out reform at different time points, the force of standardized board reform in different time acting on the capital allocation effectiveness of the group and the investment efficiency of the listed subsidiaries of the central state-owned enterprises, which proved that important related reforms would enhance the standardized board reform’s effect. Thirdly, this paper examines after the approval of standardized board reform, how do the capital allocation effectiveness of the group and the investment efficiency of the listed subsidiaries of the central state-owned enterprises change, so as to provide a reference to the time point choice of subsequent reform.