Research On The Effect Of Board Characteristics On The Enterprise Financial Risk

Financial risk has always been a hot research issue in the financial management field. Along with the establishment and development of the globe market economy, the negative effect of financial risk has become increasingly evident for the enterprise. Many enterprises and even internationally renowned enterprises fell into the financial crisis, resulting in serious impact for the company’s stability and development, meanwhile, bringing huge effect on the entire market. Evidently, the issue of enterprise financial risk management and control should be solved immediately. Nevertheless, the current state of enterprise’s management practice and theoretical research has indicated that it is still a long way for us to reduce the financial risk effectively. Corporate governance is an important influence factor of the financial risk. Therefore, as an important institution of corporate governance, it is self-evident that the board has a great effect on financial risk. Consequently, based on the actual data of the board governance, it is would be an effective way of solving the problem of financial risk management and control through studying the effect of board characteristics on the enterprise financial risk. Then it can search for the ways to reduce the enterprise financial risk from the perspective of improving the board characteristics.Based on the systematic theoretical analysis of the effect of the board characteristics on financial risk, this paper took the A-share manufacturing companies listed on the main board of Shanghai and Shenzhen during 2012-2014 as the research object,and then used the empirical research method to test the effect of board characteristics on financial risk. Finally, based on the empirical results, this paper put forward suggestions to reduce enterprise financial risk from the perspective of improving board characteristics. The empirical research found out that:(1) The board size、the number of board meetings and the average age are all positively related to enterprise financial risk. It demonstrates that the larger board size, the more board meetings and the older average age could always lead to an increase of the enterprise financial risk.(2) The proportion of board members of banking background is negatively related to enterprise financial risk, indicating that the larger proportion of board members of banking background could bring about higher enterprise financial risk.(3) The proportion of the independent directors, the dual of chairman and general manager have no obvious correlation with the enterprise financial risk, indicating that the proportion of the independent directors, the dual of chairman and general manager only have a slight effect on the enterprise risk.(4) Enterprise could reduce the financial risk through improving the board characteristics, including: keeping the board size appropriately, improving the board engagement institution, setting two grades between the chairman and general manager and improving the board meeting institution.