Abstract: Taking the data of China's A-share listed companies as samples and starting from the basic fact that the independent directors are willing to hold the shares of the listed companies that hire them, this paper conducts a theoretic analysis and proposes the following assumption that the behavior logic of the share-holding independent directors is more aligned with the original intention of the design of China's independent director system, i.e., the share-holding independent directors can be more independent of the management and the big shareholders, thereby performing their supervisory duties better. The empirical results show that in the companies with share-holding independent directors, the independent directors will express more dissenting opinions, which proves that the share-holding independent directors do perform their supervising duties more actively. Further analysis reveals that independent directors' share-holding can not only reduce management expense ratio, but also be more likely to deliver dissenting opinions when the company has lower level of equity balance. It can better restrict the tunneling behavior of the large shareholders, i.e., the share-holding of the independent directors can have a better governance effect on the agency problems of both the first and second types. The empirical conclusion is still valid after the PSM method is used to control the problem of endogeneity. The above empirical evidences are both the explorations and tests of the economic consequences of the independent directors'shareholding phenomenon, and also the analysis and re- flection of the problem of how to enhance the independence of independent directors in the context of China's institution.

Key words: independent director, shareholdings of independent directors, independence, incentive compatibility