The Design of an Optimal Corporate Governance System in Taiwan




An-Lin Chen;Che-Hao Hsiao;Lan-Feng Kao;Cheng-Shou Lu

Key Words

Corporate governance ; Inside ownership ; Monitored debt ; Taiwan ; Takeover market


Advances in Financial Planning and Forecasting

Volume or Term/Year and Month of Publication

4期(2011 / 03 / 01)

Page #

77 - 97

Content Language


English Abstract

The corporate governance mechanisms to alleviate agency costs arise from three primary forces: (1) aligning the manager's incentives with that of shareholders; (2) monitored debts; and (3) takeover market. In this paper, we examine the performance of Taiwan firms under various combinations of the corporate governance mechanisms to find out the design of an optimal corporate governance system in Taiwan. We find that Taiwan firms tend to align insiders' interests with that of minority shareholders to reinforce governance and that monitoring bank does not play its role in governance. Firms with insider alignment or under stronger takeover threat experience better performance, while firms under governance of bank monitoring experience worse performance. The alignment-based corporate governance system seems to be optimal in Taiwan economic environments.

Topic Category 社會科學 > 經濟學
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