Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments

Authors

  • Hueh-Chen Lin National Yunlin University of Science and Technology, Taiwan
  • Chin-Sheng Huang National Yunlin University of Science & Technology, Yunlin, Taiwan
  • Jack J. W. Yang National Yunlin University of Science & Technology, Yunlin, Taiwan.

Abstract

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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Author Biographies

Hueh-Chen Lin, National Yunlin University of Science and Technology, Taiwan

Department of Finance

Chin-Sheng Huang, National Yunlin University of Science & Technology, Yunlin, Taiwan

Associate Professor, Department of Finance,

Jack J. W. Yang, National Yunlin University of Science & Technology, Yunlin, Taiwan.

Professor, Department of Finance

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Published

2014-12-18

How to Cite

Lin, H.-C., Huang, C.-S., & Yang, J. J. W. (2014). Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments. International Journal of Economics and Financial Issues, 5(1), 125–135. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/1012

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Articles