Empirical Study On Relation Between Board Characteristics And Corporate Performance

As a driving force of national economic growth, environmental protection industry is ushering the "golden era" for its prosperous development. China’s twelfth five-year plan clearly demonstrated the government’s resolution to push the environmental protection industry to become a new growth point and emerging pillar of national economy. In order to adapt to the unstable and complicated market, as well as succeed under the law of survival of the fittest, it is essential for listed companies in environmental protection industry to establish efficient corporate governance mechanism to improve corporate performance. Board of directors plays a vital role in the internal and external mechanism of corporate governance as its core. It is the primary task of internal corporate governance to set up a standardized and efficient board of directors so that the board members are able to perform functions actively, respond to the external environment flexibly, as well as implement the corporate strategy orderly.The problem of whether board characteristics exert influence on corporate performance attracts considerable attention, discussion and research in academia. Scholars at home and abroad have got great achievements in the relationship between board characteristics and corporate performance with various conclusions. Most of the research selected the overall listed companies as their study object without considering specific differences in industries. This thesis selects up to 57 listed companies in environmental protection industry as samples by December 31th,2014.On the basis of principal agent theory, resource dependence theory and modern stewardship theory, the thesis depicts board characteristics from four aspects, uses principal component analysis to measure corporate performance, makes an empirical research on how the board characteristics influence corporate performance via multivariable linear regression model. Then this thesis puts forward some suggestions on the development of the board of directors, which may provide some empirical data on improving the governance structure of listed companies in environmental protection industry.The main components of this thesis are as follows:Part one is the introduction. This part mainly illustrates research background and significance, literature review at home and abroad, research content and method, research contribution and limitation.Part two is the interrelated concept and theoretical basis. Firstly, this part defines the concept of board characteristics and its concrete forms, corporate performance and its measurement methods, overview of development characteristics in environmental protection industry and the listed companies within. Secondly, this part elaborates principal agent theory, resource dependence theory and modern stewardship theory, which lays a solid theoretical foundation for empirical research.Part three is the research hypothesis. This part puts forward six hypotheses concerning the relation between board characteristics and corporate performance according to specific features of listed companies in environmental protection industry based on theoretical analysis above.Part four is the research design. Firstly, this part illustrates the sample selection and data sources. Secondly, this part introduces the variables definition such as dependent variable, independent variables and control variables. Finally, this part introduces the empirical model used in the analysis.Part five is the empirical analysis. This part provides the descriptive statistics analysis to illustrate the current situation of board characteristics in listed companies in environmental protection industry. This part also explores the relation between board characteristics and corporate performance through correlation analysis, multiple regression analysis and principal component analysis.Part six is the conclusion and suggestion. The part draws the conclusions of the empirical analysis and then puts forward customized and reasonable suggestions in terms of the conclusions so as to provide references for improving the performance of listed companies in environmental protection industry.Using financial data of listed companies in environmental protection industry from the year 2010 to 2014 as samples for empirical analysis, this thesis arrives at the following conclusions:The duality of CEO & chairman and director’s compensation of listed companies in environmental protection industry presents significant positive correlation with corporate performance; The meeting frequency of board of listed companies in environmental protection industry presents significant negative correlation with corporate performance; Board size, rate of independent directors and proportion of directors’ shareholding of listed companies in environmental protection industry present no correlation with corporate performance. This thesis puts forward suggestions such as setting moderate board size, perfecting the independent director system, fitting leadership structure of the board according to the condition of listed companies, improving the quality and efficiency of the board meetings, perfecting the performance incentive mechanism of the board.