Economic Determinants for Voluntary Appointment of Independent Directors and the Effect on Performance
Date Issued
2008
Date
2008
Author(s)
Lee, I-Fang
Abstract
The Taiwan Stock Exchange Corporation (“TSEC”) and the Republic of China GreTai Securities Market (“GTSM”) requires that companies applying initially for listing of its stock before February 22, 2002 or trading securities at OTC markets before February 25, 2002 shall elect independent directors/independent supervisors. First, this thesis tries to find incentives that make companies elect independent directors/independent supervisors voluntarily ( that is, companies applying for listing before February 22, 2002 or trading securities at OTC market before February 25, 2002 ). Besides, considering the incentives might be different for different industry, this thesis analyzes electronic industry and non- electronic industry separately. Next, this thesis tries to discuss whether electing independent directors/independent supervisors has positive effect on firm performance and whether the effect would be different due to different holding ratio of directors.he results of this study show that for whole sample companies that elect independent directors/independent supervisors have smaller firm size, higher proportion of research and develop expense, better operating performance, lower holding ratio of directors, higher holding ratio of foreign institutions, and shorter period since listed. Companies that belong to electronic industry are more likely to elect independent directors/independent supervisors than others. For electronic industry, companies that elect independent directors/independent supervisors have better operating performance, lower holding ratio of directors, higher holding ratio of foreign institutions, and shorter period since listed. For non-electronic industry, companies that elect independent directors/independent supervisors have smaller firm size. These results also indicate that the incentives are different for electronic industry and non- electronic industry.oreover, the results of this study show that there is no consistent relationship between independent directors/independent supervisors and firm performance. Due to different indicators of operating performance, for the companies which have lower holding ratio of directors, the positive effect of electing independent directors/independent supervisors on firm performance would be larger, smaller or no effect.
Subjects
independent director
board composition
firm performance
Type
thesis
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