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Building a Corporate Governance Index from the Perspectives of Ownership and Leadership for Firms in Taiwan

Author

Listed:
  • Anlin Chen
  • Lanfeng Kao

    (National University of Kaohsiung, Taiwan)

  • Meilan Tsao

    (National Pingtung Institute of Commerce)

  • Chinshun Wu

    (National Sun Yat-Sen University and Fo Guang College of Humanities and Social Sciences, Taiwan)

Abstract

This paper tests the relationship between ownership/leadership structures and stock returns for firms listed in Taiwan. A "Governance Index" is built based on four different aspects of the company's governance structure: 1. CEO duality, 2. Size of the board of directors, 3. Managements' holdings and 4. Block shareholders' holding. This index is used as a proxy measure of the effectiveness of the corporate governance mechanism. We propose that firms under good governance should outperform those under poor governance. We find a striking relationship between our governance index and stock performance of firms. The results imply that our corporate governance index is successful in evaluating the effectiveness of the governance mechanism of firms in Taiwan. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

Suggested Citation

  • Anlin Chen & Lanfeng Kao & Meilan Tsao & Chinshun Wu, 2007. "Building a Corporate Governance Index from the Perspectives of Ownership and Leadership for Firms in Taiwan," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 251-261, March.
  • Handle: RePEc:bla:corgov:v:15:y:2007:i:2:p:251-261
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    Citations

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    Cited by:

    1. Lee, Shih-Cheng & Lin, Chien-Ting & Chang, Pei-Ting, 2011. "An Ohlson valuation framework for valuing corporate governance: The case of Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 19(4), pages 420-434, September.
    2. repec:eee:jocaae:v:6:y:2010:i:2:p:47-60 is not listed on IDEAS
    3. Tang, Hui-wen & Chen, Anlin & Chang, Chong-Chuo, 2013. "Insider trading, accrual abuse, and corporate governance in emerging markets — Evidence from Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 24(C), pages 132-155.
    4. Yeh, Chien Mu & Taylor, Tracy & Hoye, Russell, 2009. "Board roles in organisations with a dual board system: Empirical evidence from Taiwanese nonprofit sport organisations," Sport Management Review, Elsevier, vol. 12(2), pages 91-100, May.
    5. Windsor, Duane, 2009. "Tightening corporate governance," Journal of International Management, Elsevier, vol. 15(3), pages 306-316, September.
    6. repec:eee:spacre:v:15:y:2012:i:2:p:237-255 is not listed on IDEAS
    7. Dutordoir, Marie & Strong, Norman & Ziegan, Marius C., 2014. "Does corporate governance influence convertible bond issuance?," Journal of Corporate Finance, Elsevier, vol. 24(C), pages 80-100.
    8. Chen, Anlin & Kao, Lanfeng & Lu, Cheng-Shou, 2014. "Controlling ownership and firm performance in Taiwan: The role of external competition and internal governance," Pacific-Basin Finance Journal, Elsevier, vol. 29(C), pages 219-238.

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