The Relationship Of Double Principal-agent Cost And The Enterprise Value

The boards of directors as an important corporate governance mechanism, the information of structure has become a hot content in the study, the researchers considered it as the core of the internal governance mechanism. Rationalization of the board system has become one of the ways to improve the effectiveness of corporate governance. Under the condition of dispersed ownership, in order to effectively monitor, also in order to overcome the dispersed shareholders to monitor managers’ behavior by collective action problem, the board is a kind of inevitable choice. If the board can effectively make decisions and supervise the behavior of the managers, the value of the company will be fully enlarged, the interests of the shareholders will also be effectively protected.At present, China’s market economy is in a transition process, the shareholder of a company is not completely homogeneous and dispersed, ownership have a certain degree of concentration. The controlling shareholders are in the absolute dominant position. The controlling shareholders and the non-controlling shareholders not only exist interests differences, but also presence of asymmetric information problems. Controlling shareholders may have the moral hazard problems of violating the interests of minority shareholders, which in terms of the controlling shareholder’s private benefits, but in terms of the minority shareholders, is another kind of agency costs, namely the second type of agency cost. In this way, the controlling shareholder is not only the client managers, also it is agent of minority shareholders, the controlling shareholder is in a double principal-agent relationship, resulting the double principal-agent problem.Therefore, under the conditions of concentration, the board is easy to lose its independence. When the chairman and CEO or general manager take two jobs in one position, big shareholders mastered the absolute control of the company, the controlling shareholder in pursuit of excess private benefits of control rights, may be through the "tunnel" to emptied value of the company, thus encroaching on the interests of minority shareholders. It is relatively increased by controlling shareholders on the agency cost of minority shareholders (the second category of agency costs), and also damage the overall value of the company.Indeed, as previously stated, the rationalization of the board system is one of the effective ways of corporate governance. Independent directors’proportion, and so on, are the factors influencing the board independence. At the same time, according to the upper echelons theory, corporate behavior is an indirect response to the managers’ features. Similarly, the board behavior is also a response to the director of their own characteristics. Directors of their own information reflects their different cognitive biases, affected the directors’independence of the selection in the face of the company’s environment or the solution to the problem. Accordingly, personal information of the board of directors has an important influence on the board of directors’independent decision-making behavior. The so-called information of the board of directors including the board of directors members’age, gender, level of education, compensation, shareholdings and so on. These information factors can also affect the board handling behavior on the double principal-agent problems, also has a far-reaching influence on the value of the company. On the study need of relationship of board independence, double principal-agent problem and the enterprise value, this paper made theoretical summary and empirical studies on the relationship of the three, so as to provide ways for shareholders to maintain their own interests, and to enhance the value of the company.Firstly, this article elaborated the principal-agent theory, the economic man hypothesis, asymmetric information theory, to build the theoretical background of double principal-agent problems, at the same time introducing the upper echelons theory as the foundation, to explain the board independence to the board deal with the double principal-agent problems role to play, and the influence of board independence on the value of the company. Under the double principal-agent theory, the article also further research whether there are regulatory role in the principal-agent costs between board independence and the value of the company.Based on 2010-2013 as the research time, it chooses a-share main board listed companies as the research object on Shanghai Stock Exchange and Shenzhen Stock Exchange, through the establishment of hypothesis and model for empirical analysis. At first, it selected nine indicators to establish comprehensive index board independence from the board structure, the board composition, directors’ personal characteristics and the board of program in four areas. Secondly, from the first kind of agency costs and the second category of agency cost two dimensions to parse of double principal-agent problems. The first kind of agency cost between shareholders and managers caused by asymmetric information, measured by management fee; the second category of agency cost that is caused by the controlling shareholders encroach on interests of minority shareholders, measured by receivable money rate. In after multivariate regression testing, this paper will take Tobin’s Q as explained variable to measure the value of the company, to empirical analysis board independence and its influencing factors and the dual principal-agent relationship between cost and value of the company. Study conclusion shows that:double principal-agent costs of listed company and the value of the company are negatively related, respectively; Board independence between double principal-agent relationship of cost and value of the company positively regulating role; Under the first kind agent cost, both separation and proportion is pure in regulating variable, remuneration of the director is quasi manipulated variable, director term is a negative pure adjustment variable, reputation is not adjustment variable; Under the second category of agency cost, reputation is a regulating variable, the proportion and term of independent director are negative pure adjustment variables, separation is a negative quasi adjustment variables, remuneration of the director is not adjustment variable.Finally, based on the background of Chinese corporate governance, according to the research conclusion, paper put forward a comprehensive of understanding of double principal-agent cost, improving the directors selection mechanism, enhancing the comprehensive competence, perfecting the incentive mechanism for independent directors and other proposals.