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Board independence and firm value: A quasi-natural experiment using Taiwanese data

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journal contribution
posted on 20.04.2020, 09:55 by Yaoyao Fan, Yuxiang Jiang, Mao-Feng Kao, Hong LiuHong Liu
We examine the impact on firm value of independent directors based on Taiwanese firms. Using the changes in independent director composition mandated by the Amendments of Security and Exchange Act in Taiwan as a quasi-natural experiment, we document the arguably causal and negative effect of independent directors on firm value in both the short and long run. We also find that, in response to this act, firms have tended to replace existing non-independent directors, rather than simply adding new independent directors. We also find that the new independent directors have the same qualifications as those replaced non-independent directors but are costlier and busier. The evidence reflects the short supply of qualified independent directors and might explain the negative valuation effect.

Funding

Major Project of the National Social Science Fund of China (16ZDA042)

Institute of Belt and Road Studies, Sun Yat-sen University

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Empirical Finance

Volume

57

Pages

71 - 88

Publisher

Elsevier

Version

AM (Accepted Manuscript)

Rights holder

© Elsevier B.V.

Publisher statement

This paper was accepted for publication in the journal Journal of Empirical Finance and the definitive published version is available at https://doi.org/10.1016/j.jempfin.2020.04.001.

Acceptance date

07/04/2020

Publication date

2020-04-15

Copyright date

2020

ISSN

0927-5398

Language

en

Depositor

Prof Hong Liu. Deposit date: 10 April 2020