Research On The Influence Of Board Informal Hierarchy On Firm Risk

Firm risk and firm activities go hand in hand.If we only pay attention to performance improvement and ignore the attention to risk in the process of enterprise development,it may lead to serious consequences.As an important part of the corporate governance structure,decision-making and supervision are the main responsibilities of the board of directors.The board of directors needs to be responsible for the results of the decisions made,and also need to supervise the behavior of the management in the daily operation.The decisions made by the company and the behavior of the management are closely related to the enterprise risk,so the directors may have an important impact on the firm risk level.In the existing research on the influencing factors of firm risk,scholars mostly discuss the impact of the formal governance mechanism of the board of directors such as the size of the board of directors and the independence of the board of directors on firm risk.Some scholars also discuss the impact of the social capital of the board of directors formed by the chain director network on enterprise risk from the characteristics of the overall structure of the board of directors,However,no scholars have studied how the board informal hierarchy affects firm risk.Informal hierarchy is an implicit level formed within the board of directors due to the different personal social capital of directors.When the formal system design cannot meet the requirements of the board of directors,the existence of informal hierarchy can create a good cooperation atmosphere for the board of directors,standardize the organizational order of the board of directors and give full play to the resource advantages of each director member,So as to improve the decision-making and supervision ability of the board of directors,strengthen the overall performance ability of the board of directors,and provide guarantee for reducing firm risks.In the Chinese cultural context of "relationship based"and "advocating authority",it is of great significance to explore the impact of the informal hierarchy formed by the different personal social capital of directors on firm risk.Based on the relationship contract theory and organization level theory,this paper empirically analyzes the impact of the informal level of the board of directors on firm risk.The results show that the clearer the board informal hierarchy,the lower the firm risk;In terms of influence mechanism,the board informal hierarchy can reduce firm risk by improving the decision-making efficiency of the board of directors and inhibiting the self-interest behavior of management;In terms of influencing factors,when the environmental uncertainty is higher and the chairman is not at the highest informal level,the board informal hierarchy plays a stronger role in reducing firm risk.The research conclusion of this paper supplements the literature on the effect of the board informal hierarchy,enriches the research on the influencing factors of firm risk,and has important reference significance for deeply understanding the governance role of the board of directors,constructing a reasonable board structure and realizing the sustainable creation of enterprise value.