The Independent Director Nomination,Market Reaction And Supervisory Efficiency

Nominated by whom,independent directors will represent the interests of whom and perform the function of independent directors from whose standpoint.After comparing the Chinese and foreign independent director selection mechanism,we found the lack of specialized agencies about the nomination of independent directors in China;we found the difference about ownership structure of listed companies in China and foreign countries;we found the difference of the board in China and foreign countries.These differences prompted us to think about whether the system of independent director's nomination effective in reality?Can these nominated independent directors play their oversight functions?How about the market reaction to the announcement about independent director's nomination?This paper selects the 2006-2015 shares of the Shenzhen A-share non-financial enterprises as the sample.From the perspective of independent director nominees,we studied the market reaction to the announcement about independent director's nomination and we studied the quality of financial reporting after these independent directors nominated by shareholders and the board.The study found the following points.Firstly,compared to the announcement of independent directors nominated by other shareholder and the board,the announcement of independent directors nominated by controlling shareholder is more likely to bring negative market reaction.Secondly,compared to independent directors nominated by other shareholder and the board,the independent directors nominated by controlling shareholder is more likely to bring low surveillance function.Thirdly,compared to companies with equity dispersed,in companies with equity centralized,financial reporting quality becomes worse after independent directors nominated by the controlling shareholder.Fourthly,compared to companies where a man occupies president and general manager,in companies where two persons occupy president and general manager,financial reporting quality becomes worse after independent directors nominated by the board.Above all,the announcement of independent directors nominated by controlling shareholder will bring negative market reaction and the more serious problems in insider control,the lower supervisory efficiency of independent directors nominated by the controlling shareholder.This research is not only helpful to solve principal-agent problems of listed companies,but it also makes up some defects of the board governance mechanism.This paper enriches the research on the board governance and the system of independent director nomination,and provides a new idea for how to perfect the system of the independent director nomination and how to improve the supervisory efficiency of independent director.