Corporation Governance of International Joint Venture : Relationship of Boards of Directors, External Governance Mechanisms, Task Contingencies and IJV Performance
Date Issued
2008
Date
2008
Author(s)
Chang, Yi-Chieh
Abstract
In this study, we examined the relation between the Board of Directors and IJV’s (International Joint Venture) performances by analyzing 74 joint venture cases that consist of the Taiwan corporation listed in the Taiwan Stocks Exchange or traded Over-the-Counter (OTC). The Board of Directors serve three important functions: monitoring function, provision of resources function and balance of stocker’s benefit function. Our analysis indicates that relations between the function and IJV’s performances are positive. The function of the Board of Directors is determined by the composition of this group. Higher return of investment (ROI) will happen in the following four situations, high independence of the Board of Directors, high centralization of the votes among large blockholders, high ownership owned by the directors, and the high proportion of executive managers that were appointed by the parent company to IJV’s board to be legal representatives. The following three situations will lead to low return of investment, high ratio of board members controlled by the ultimate owners, the ultimate owners as the dual role of chairman and CEO, and high deviation of the voting rights from cash-flow rights. The bigger the board size is or the more unequal distribution of votes among large blockholders is, the longer the longevity of IJV. The higher the proportion of the director appointed by the parent company to IJV board to be legal representatives, the shorter the longevity of IJV will be. The findings also show that IJV’s performance is influenced by external governance mechanisms. In addition, the external governance mechanisms will also moderate the relation between the internal governance mechanisms and IJV’s performance. We also find that the home country’s corporate governance environment of the ultimate owners has a stronger effect on IJV’s performance than the host country’s corporate governance environment does. We also note that the relationship of corporate governance structures and JV’s performance is significantly dependent on JV’s task contingencies. Finally, we discuss the key theoretical issues and practical implications of corporate governance of IJV.
Subjects
International Joint Venture
Corporate Governance
Board
Corporate Governance Environment
Task Contingencies
Type
thesis
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