The Study of Relationship between Corporate Governance and Business Performance
Date Issued
2004
Date
2004
Author(s)
Lin, Tzong-Huei
DOI
zh-TW
Abstract
Abstract
Since 1997, the Asian financial crisis has deeply affected the development of emerging markets in Asia. Johnson et al. (2000) find that measures of corporate governance, particularly the effectiveness of protection for minority shareholders, provide powerful explanatory ability for exchange rate depreciation and stock market decline better than do standard macroeconomic measures. In addition, many studies have found that there exist serious shortcomings of corporate governance in East Asia (Claessens et al., 2002; and so on).
The objects of this study are as follows: First, this study tries to construct a Corporate Governance Performance Prediction Index （CGPPI）which can predict firms’ future performance. Second, this study plans to investigate the relationship between corporate governance and business performance. Third, this study plans to investigate the issue about whether the Corporate Governance Performance Prediction Index （CGPPI）is value relevant. Fourth, this study plans to investigate the issue about whether outside institutional directors and outside institutional supervisors will impact firms’ performance. Firth, this study plans to investigate the issue about whether the independent manager directors can make influences on firms’ performance. Sixth, this study plans to investigate the issue about whether the foreign institutional investors can influence firms’ future performance. Seventh, this study also investigates the relationship between the shareholdings of the directors/supervisors and the firm’s future performance. Eighth, this study plans to investigate the relationship between related transactions and corporate performance. Tenth, this study tries to construct a corporate governance database of Taiwan.
Using data from Taiwan's public companies, this study documents evidence that the Corporate Governance Performance Prediction Index （CGPPI）constructed in this study can be used to predict firms’ future performance. This study also finds that the Corporate Governance Performance Prediction Index （CGPPI）is value relevant. I also find that the relationship between the outside institutional supervisors and firms’ future performance is negative, and the relationship between outside institutional directors and firms’ future performance is mixed. The empirical evidence also indicates that shareholdings of the directors/supervisors and the foreign institutional investors have a significant positive relationship with firms’ future performance. In addition, the empirical evidence also indicates that the related sale may reflect the diversification of the firms, and make the firms enjoy the benefits of cost saving.
This study contributes to the literature in the following ways. First, this study documents evidence that the Corporate Governance Performance Prediction Index （CGPPI）constructed in this study can be used to predict firms’ future performance. Second, as for the issue about whether the foreign institutional investors and the shareholdings of the directors/supervisors can help firms improve their future performance, this study provides positive evidence. Third, this study indicates that the independent manager directors can help firms to improve their future performance. Fourth, prior studies generally documented that the related sales have a negative effect on the firms’ performance. However, this study finds that the related sale may reflect the diversification of the firms, and make the firms enjoy the benefits of cost saving.
Subjects
公司治理
價值攸關性
關係人交易
外資
法人董事與法人監察人
institutional directors and institutional supervis
corporate governance
related transactions
value relevant
foreign institutional investors
Type
other