Ownership Structure, Board of Directors and Firm Performance: Evidence from Taiwan

Aziz Jaafar (), Lynn Hodgkinson and Mao-Feng Kao
Additional contact information
Mao-Feng Kao: National Dong Hwa University

No 19011, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: Purpose 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. Design/methodology/approach 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. Findings 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. Practical implications 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. Originality/value 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

Keywords: corporate governance; independent directors; board characteristics; ownership structure (search for similar items in EconPapers)
JEL-codes: G34 M40 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-acc, nep-bec, nep-cfn and nep-cse
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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