Empirical Study on Relationship between Independent Director System and Profitability of Listed Companies in China

This paper uses econometrics model to explore the relationship between independent director system and profitability of listed companies in China. It chooses age, ratio, probability of meeting attendance, and compensation of independent directors as explanatory variables and ROE (return on equity) and EPS (earnings per share) as dependent variables. Data is collected from 100 listed companies in China. Descriptive statistics, correlation analysis, and regression analysis are utilized in this paper. It draws conclusions based on the above data analysis. Independent director system is positively relevant to profitability of listed companies in China. However, this relationship between them is not so obvious. Only the probability of meeting attendance of independent directors is strongly relevant to EPS and ROE. The ratio of independent directors is strongly relevant to ROE but not significantly relevant to EPS. The age and compensation of independent directors are not significantly relevant to corporate profitability.