The relationship between professional knowledge of independent director and supervisor and voluntary financial forecast
Date Issued
2009
Date
2009
Author(s)
Lin, Chia-Hsin
Abstract
Since 2002, Taiwan Stock Exchange and OTC have revised the Criteria for Review of Securities Listings, the Criteria for Review of Securities over-the-counter listings, Listed and over-the-counter corporate governance practice rule, and the securities and exchange law, formally regulating the qualifications and expertise of independent directors and independent supervisors. In addition, Financial Supervisory Commission of Executive Yuan has decided to terminate the regulation of mandatory disclosure of financial forecasts in order to improve the quality of financial forecasts since 2005. his study examines the effect of selecting qualified and professional independent directors and independent supervisors on voluntary financial forecasts. In order to discuss what expertise can improve the quality of financial reports, this study divides professional knowledge into four categories: accounting, financial, managerial, and law. The empirical results show that companies with independent directors or independent supervisors are less likely to issue voluntary financial forecasts. However, managers tend to issue more voluntary financial forecasts when independent directors with law expertise exist on the board or as the percentage of law experts increase among independent directors. In addition, companies with more accounting expertise independent directors tend to issue less precise voluntary financial forecasts.
Subjects
voluntary financial forecast
independent director
independent supervisor
professional knowledge
precision
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