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Independent Directors:A Part of Agency Problem

Xie Deren  
The paper studies the independent directors institution.We define the natu re of executives as the human capital owners who enter into firm contracts with their human capital concerning capacity to run a firm and own the residual right s of control.When directors and the board of directors substantively own the res idual rights of control,both independent directors and inside directors are the executives of firm in nature,the board of directors is the management,there is s ubstantive agency relationship and agency problem between directors(the board of directors)and shareholders.Consequently,as executives of firm,independent direc tors themselves are a part of agency problem at first.Independent directors may not be a kind of efficient corporate governance mechanism until the agency probl em between independent directors and shareholders has been sufficiently alleviat ed.In our view,the absence of common cognition that independent directors are fi rm executives and that independent directors at first are a part of agency probl em is the underlying reason which should be responsible for the insignificant re lation or significantly negative relation between board independence and firm pe rformance.
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