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 |
| _version_ | 1797911537804902400 |
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| author | Hueh-Chen Lin Chin-Sheng Huang Jack J. W. Yang |
| author_facet | Hueh-Chen Lin Chin-Sheng Huang Jack J. W. Yang |
| author_sort | Hueh-Chen Lin |
| collection | DOAJ |
| description |
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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| first_indexed | 2024-04-10T11:43:23Z |
| format | Article |
| id | doaj.art-cfe4849bf2e048f998f65b787467cb79 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T11:43:23Z |
| publishDate | 2014-12-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-cfe4849bf2e048f998f65b787467cb792023-02-15T16:17:28ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382014-12-0151Market Reaction to Voluntary and Mandatory Announcements of Independent Director AppointmentsHueh-Chen Lin0Chin-Sheng Huang1Jack J. W. Yang2National Yunlin University of Science and Technology, TaiwanNational Yunlin University of Science & Technology, Yunlin, TaiwanNational Yunlin University of Science & Technology, Yunlin, Taiwan. 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 https://www.econjournals.com/index.php/ijefi/article/view/1012 |
| spellingShingle | Hueh-Chen Lin Chin-Sheng Huang Jack J. W. Yang Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments International Journal of Economics and Financial Issues |
| title | Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments |
| title_full | Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments |
| title_fullStr | Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments |
| title_full_unstemmed | Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments |
| title_short | Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments |
| title_sort | market reaction to voluntary and mandatory announcements of independent director appointments |
| url | https://www.econjournals.com/index.php/ijefi/article/view/1012 |
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