Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments

Hueh-Chen Lin, Chin-Sheng Huang and Jack J. W. Yang
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Hueh-Chen Lin: Department of Finance, National Yunlin University of Science and Technology, Yunlin, Taiwan.
Chin-Sheng Huang: Department of Finance, National Yunlin University of Science and Technology, Yunlin, Taiwan.
Jack J. W. Yang: Department of Finance, National Yunlin University of Science and Technology, Yunlin, Taiwan.

International Journal of Economics and Financial Issues, 2015, vol. 5, issue 1, 125-135

Abstract: In this paper, we use a unique natural experimental setting to examine the market value of both voluntary and mandatory independent director appointments using a sample of Taiwanese listed firms. We find a significantly positive stock price reaction when a firm announces it is appointing independent directors to its board. Particularly, poor corporate performance and a higher degree of information asymmetry significantly benefit from the mandatory appointment. We conclude that the mandatory regulation for Taiwan listed firms to have a minimum number and ratio of independent directors on their boards appears to be a sound policy

Keywords: Corporate Governance; Board Independence; Independent Director; Mandatory Appointment. (search for similar items in EconPapers)
JEL-codes: G34 G38 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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