TY - JOUR

T1 - Ownership Structure, Board of Directors and Firm Performance

T2 - Evidence from Taiwan

AU - Kao, Mao Feng

AU - Hodgkinson, Lynn

AU - Jaafar, Aziz

PY - 2019

Y1 - 2019

N2 - Using a dataset of listed firms domiciled in Taiwan, the main aim of this paper is empirically assess the effects of ownership structure, board of directors on firm value.Using a sample of Taiwanese listed firms from 1997 to 2015, the study uses a panel estimation to exploit both the cross-section and time-series nature of the data. Furthermore, a 2SLS regression model is used as robustness test to mitigate the endogeneity issue.Our main results show that the higher the proportion of independent directors, the smaller the board size, and together with a two-tier board system and no CEO duality, the stronger the firm’s performance. With respect to ownership structure, block-holders’ ownership, institutional ownership, foreign ownership and family ownership, are all positively related to firm value.Although the Taiwanese corporate governance reform concerning the independent director system which is mandatory only for newly-listed companies is a successful, the regulatory authority should require all listed companies to appoint independent directors to further enhance the Taiwanese corporate governance.First, unlike much of the previous literature on western developed countries, this study examines the effects of corporate governance mechanisms on firm performance in a newly-industrialised country, Taiwan. Second, while a number of studies use a single indicator of firm performance this study examines both accounting-based and market-based firm performance. Third, this study addresses the endogeneity issue between corporate governance factors and firm performance by using two stage least squares (2SLS) estimation, and details the econometric tests for justifying the appropriateness of using 2SLS estimation.

AB - Using a dataset of listed firms domiciled in Taiwan, the main aim of this paper is empirically assess the effects of ownership structure, board of directors on firm value.Using a sample of Taiwanese listed firms from 1997 to 2015, the study uses a panel estimation to exploit both the cross-section and time-series nature of the data. Furthermore, a 2SLS regression model is used as robustness test to mitigate the endogeneity issue.Our main results show that the higher the proportion of independent directors, the smaller the board size, and together with a two-tier board system and no CEO duality, the stronger the firm’s performance. With respect to ownership structure, block-holders’ ownership, institutional ownership, foreign ownership and family ownership, are all positively related to firm value.Although the Taiwanese corporate governance reform concerning the independent director system which is mandatory only for newly-listed companies is a successful, the regulatory authority should require all listed companies to appoint independent directors to further enhance the Taiwanese corporate governance.First, unlike much of the previous literature on western developed countries, this study examines the effects of corporate governance mechanisms on firm performance in a newly-industrialised country, Taiwan. Second, while a number of studies use a single indicator of firm performance this study examines both accounting-based and market-based firm performance. Third, this study addresses the endogeneity issue between corporate governance factors and firm performance by using two stage least squares (2SLS) estimation, and details the econometric tests for justifying the appropriateness of using 2SLS estimation.

KW - Board of directors

KW - Firm performance

KW - Ownership

U2 - 10.1108/CG-04-2018-0144

DO - 10.1108/CG-04-2018-0144

M3 - Article

VL - 19

SP - 189

EP - 216

JO - Corporate Governance

JF - Corporate Governance

SN - 1472-0701

IS - 1

ER -