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Relationship with the value of the company based on the stock price perspective board members

Author: ShenBaoHui ZhanXiaoYan From: www.yourpaper.net Posted: 2009-10-20 16:36:24 Read:
Abstract: The article discusses the personal values ??of the leader of the Board members, when they enter or exit the board of directors of the company, the company's stock price changes, the magnitude of change often are in the 1% of the value of the company or more. The survey found that when an important event affecting the value of a company's stock, this effect will be passed to the other shares of the company, and the effect is basically the same, very sensitive to changes in the price leader in professional quality, status and other factors.
Keywords: board members; company value; stock
Bhagat (1999) to draw non-core leader of the Board of Directors of the Company in the writings of the value of the company contribution is minimal, and if the company's only one leader, the The value is how much the investigation, according to the theory of the Board referred to in the existing international literature to draw the leader almost no value. The large number of empirical studies and empirical data also proved that the Board of Directors theory, which makes many financial experts also concluded that: the leader just clothes in the windows, and not be able to attract a lot of shareholders. Morcketal (1998) explored the ownership relationship between the value of the company. Brickleyetal (1997) proposed a leader in the structure of the value of the company and its board of directors characteristics, and that there is negative correlation between board size and value of the company, and if a leader is more than holding shares of the largest the effectiveness of the company to play a catalytic role.
Despite widespread doubt the effectiveness of the board of directors, but the study of a series of the company's financial situation, but stressed that the relationship between the independent directors and the company's value, some of the data even goes back to the In the 1980s, the data show that the potential individual investors realized that members of the Board has the ability to increase or reduce shareholders' equity. The stock market can indeed reflect changes in the structure of the Board of Directors, the empirical results obtained for the share price is often based on the qualifications of a new director and rise or fall more than 1%, the survey data show When a new director of information appearing on the market, investors often re-estimated the market value of this company. Recent scholars committed to direct change of the value of the company by the board of directors of a number of new research information, and they found more and more evidence is sufficient to show that a relationship exists between the leader's qualifications and price. But the findings but stressed the value of the company's leader, that many board reform may have a positive effect, consistent theory and survey data but this is most likely only superficial and even counterproductive in practice . According to scholars the focus of the research study, the use of foreign data analysis arrangements: The second part describes the appointed members of the board of directors to change about shareholder reaction; third part describes the characteristics of the appointment by the Board of Directors; fourth some conclusions.
The reaction of a shareholder on the board of directors change
"Who are the People in the News" column in The Wall Street Journal listed the appointment of directors to organize and select a different scale corporate data for more than 1,200 listed as research sample, which excludes cumulative excess yield CAR does not have the independence and family company data sample calculation method is calculated according to a standard market model, most of the studies listed later in this article is also in accordance with this method of calculation, This helps to compare the results of the study.
Found in the samples outside directors Welcome popular with shareholders, the stock market reaction equal share price rose by 0.22%, this reaction seems to depend on the size of the company, such as small and medium-sized enterprises CAR is the CAR of the company's 3 times. Due to the relatively small proportion of medium-sized companies in the selected sample, the market value of only $ 449.1 billion the size of this result so big companies some frustration. The results show that the new outside directors from the terms of the economic value of the contribution to the company is small for large companies. After the investigation also tend to be concentrated in large companies, and the conclusion has been generally recognized: the appointment of new outside directors will not affect the value of the company attaches great importance to the leader of an independent external investors under certain conditions. This description is defined gray directors later in this section refers to the interests of the individual and the company directors of the conflict. And limit the scope of 373 outside directors in the Fortune Global 500 companies.
These studies will be three days of the the CAR calculation method again is used to study the reaction of investors to the appointment of the results showed that investors be able to raise or lower the market value of the Fortune 500 companies was more than 1%, a very important economic significance of several tens or even higher for those market capitalization. Sample research found that the appointment of outside directors on the market and did not generate a huge response, and only 0.11% in the selected sample, the average cumulative excess yield CAR, but the analysis of the results of the CAR for new the overall quality of its directors to join or quit very sensitive. When an independent outside directors was appointed to take over a director of, in the case of keeping other factors constant CAR than the previous 1.3% higher, this result suggests that investors' attention to gradually improve the independence of the board. After the calculation when the CAR is 1.2% lower than usual. Behind the results are somewhat surprising, the CEO will be involved in the selection of new directors prior to the appointment of the new directors, which shareholders can be described as well known. As a result, when the CEO participate in the selection of new directors, the appointment of outside directors less efficient, and their ability and normal baseline did not meet the market requirements of the post. When these people with the company's interests or have ties with individual managers, will affect the company's external transactions. These directors to the board of directors, the average share price in the data significantly decreased by 0.91%, these conclusions is particularly important, most businesses know that the company has the interests of directors as the company's management staff, certainly there are a lot of problems. When gray Directors to the Board an independent outside directors to replace the departed, the price will be increased by 1.3%. Further studies confirm the shareholders' response to changes in the role of independent directors in the stock price also has a very important significance. The many shareholders condemn those directors serving on the board of directors of several companies at the same time, the the these directors often busy the reasonable allocation of time to deal with the busy work of the Board of Directors. Because most companies are willing to actively cooperate with them, so that they can successfully cloned several positions. In 1995, more than 120 people at the same time serving on the Board of Directors of a number of large U.S. companies, and possession of 8 or more board seats, five years after this data down to 2 people.
In those who worked in three or more of the Board of directors as its object of study, to discuss the role of the outside directors of those the avatar number of post. The 1989-1995 Forbes 800 strong enterprises as the study sample, the resignation of the incumbent directors and the newly appointed positions for the Board of Directors of the Company. Compared to full-time on a single board of directors of the directors, shareholders in favor of dismissal "while serving several outside directors. If you dismiss these directors can be freed from the busy state so that the Board, that the proposal will get more support. Of course, this also depends on whether the majority of outside directors capable busy work. Similarly, when the incumbent directors of a company part-time on the board of directors of other companies, often adverse market reaction, and with the increase of the directors in the board of directors of each company's share of the seats, the impact will be more and more serious. The new outside directors of financial awareness seems to also affect the reaction of shareholders of serving them. As mentioned above, when the outside directors approved the Board of Directors, the excess returns of the stock will be significantly improved. Based on a sample to conduct classification, director of financial awareness, such as: the appointment of outside directors in investment banking or other financial institutions brought about by the increase in stock returns is highest.
The board appointments characteristics
There is considerable evidence to show that before any U.S. company appointed leaders are capable of and there is little conflict of interest, the existence of this pattern is many pursued by the Board. More smaller board the external leader and the stock ownership of external long-term, and gray external leader is appointed by the ratio has greatly declined, and a lot of data but also provide us with further information on this view, these are all 500 companies and other large U.S. companies. These companies in 1998 and 2003, the newly appointed leader. The data is divided into two time periods disclosure, from 2001 to 2003, this time it is worth studying, because it includes the implementation of the relevant Board Act and the re-marking of the time.
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