A Study Of Governance Effectiveness And "Reverse Elimination" Of Independent Directors

In the modern corporate governance mechanism,independent directors are expected to play an effect role in monitoring governance,and solve agency problems existing widespreadly between shareholders and management,between controlling and minority shareholders,and between shareholders and debtholders.In the circumstance that companies in most countries or districts seldom revel their board meeting decision-making processes to the public,thus the board is also named as a black box.Since December 2004,China's listed companies are compulsively required to revel their independent directors' opinions and reasons for issuing non-unqualified opinions on detail matters at board meetings according to rules introduced by China Securities Regulatory Commission(CSRC),which open the black box to the public.From those opinions and additional description words,the public can somewhat judge directly whether an independent director is conscientious in monitoring.Based on the independent opinions data from A-share companies during 2005 and 2014,this thesis studies the consequences after a non-unqualified opinion from both the firm-level and the individual-level perspective.At the point view of a company,this empirical study proves that companies receiving non-unqualified opinions in a certain year will show a greater improvement in operating performance,have a fewer increments in other receivables,pay more dividends,and exhibit a fewer increments in bank loans in the next fiscal year than those receiving unqualified opinions from all the independent directors.As for the individual point,by analyzing the likelihood of losing the independent director's position for those who have issued non-unqualified opinions,the result show that the risk is higher,especially when the degree of non-unqualified opinions is high,too.Thus,we can see a distinguished contradiction between the firm and individual consequences.On the one hand,the corporate gains goodness due to governance effectiveness.On the other hand,the individual issuing a non-unqualified opinion is faced with badness like being eliminated reversely.This contradiction makes it necessary to think about how to improve current policies.In the perspective of policy makers,they can get a positive feedback from governance effectiveness,which supports the improvement direction of enhancing information disclosure and multi-aspect monitoring.Furthermore,the contradiction of goodness and badness makes it very necessary to reform the independent director election policy to ensure independent directors accomplish their duties safely and diligently.