Independent Directors’ Heterogeneity, Attendence And The Growth Of A Company

It is over ten years since China introduced the independent direcotrs’ system in 2001. The establishment of the committee of independent directors in 2014 states that the related departments have payed more and more attention to this system. As an important part of corporate governance management, the independent directors’ system plays an effective role in reducing agency costs, promoting a company’s competitiveness and proceting minority shareholders. The independent directors can also play many roles in a company, such as supervisor, consultant and resource provider. However, there are some negative reports about the independent direcctors in recent years, such as “the vase directors”, “the rubber stamp” or “too busy directors”, which indicates that the independent directors’ system still exists many problems in the running. How to make this system more effective in China’s economic environment is the focus of the practice and the academia. Through the existing literatures, we can see that the previous studies on the subject of independent directors mainly use the characteristics —— effect model, or the behavior —— effect model, rarely use the characteristics —— behavior —— effect model, which is the true way independent directors can play a role in a company. This paper uses the characteristics——behavior——effect model, exploring how to enhance the effectiveness of the independent directors system in two aspects: the static selection aspect and the dynamic working aspect.The company’s growth reflects the development of a company in a relatively long period. It is more important for a company than the temporary performance. However, the corporate governance problems block the growth seriously. Some companies even die too early after a few years they founded, which causes some negative effects to the healthy development of Chinese economy. The current studies have found many factors infecting the growth of a company, including the inside and outside factors, the financial and non-financial factors, but still lack ones specialising in the independent directors and the growth of a company. As an important resouce of a company, the independent directors can help a company form the competitive advantages. Therefore, studies in this field is necessary. This paper tries to explore the relationship between the independent directors’ heterogeneity, independent directors’ attendance and the growth of a company on various aspects based on the Chinese capital market.This paper adopts the method of literature analysis and empirical analysis. Through reviewing and summarizing the current researches, analyzing the classical theories and their mechanism, this paper gives the hypothesis, and empirically examines them. Based on the data of Shanghai and Shenzhen A-share listed companies from 2009 to 2013, this paper empirically examines the impact of the independent directors’ heterogeneity, attendance on the growth of a company. First of all, this paper examines the relationship of the independent directors’ serving industry background heterogeneity, age heterogeneity and the growth of a company. Secondly, this paper uses the independent directors’ average number of part-time jobs and attendance of board meetings as moderator variables in the model to study their regulatory roles. Finally, this paper carries on the robustness test. The main results show:(1) The independent directors’ serving industry background heterogeneity and age heterogeneity all can significantly increase the growth of a company, which means the higher heterogeneity of independent directors’ serving industry background and age, the better growth of a company.(2) The independent directors’ attendance palys an important regulatory role in the relationship between independent directors’ heterogeneity and the growth of a company. The lower, average number of independent directors’ part-time jobs, or the higher of independent directors’ attendance of board meetings, the independent directors’ heterogeneity will aggravate the growth of a company.Based on the results of empirical analysis and combined with the practical situation of our country, this paper gives some policy suggestions in four aspects about how to enhance the effectiveness of independent directors’ system in China. This paper not only broadens the theory system of independent directors, but also enriches the existing researching of factors that affect a company’s growth. Meanwhile, this paper offers some enlightenment for the listed company’s on how to construct an effective independent directors team, and how to enhance the working effectiveness of the independent directors. This paper also calls for the listed company managers to pay more attention to the growth of their company, and to pay more attention to the relationship between the independent directors and the growth of their company.