Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments
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 independen...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
EconJournals
2014-12-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | https://www.econjournals.com/index.php/ijefi/article/view/1012 |
| Summary: | 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.
JEL Classifications: G34; G38
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| ISSN: | 2146-4138 |