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Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments

Author

Listed:
  • Hueh-Chen Lin

    (Department of Finance, National Yunlin University of Science and Technology, Yunlin, Taiwan.)

  • Chin-Sheng Huang

    (Department of Finance, National Yunlin University of Science and Technology, Yunlin, Taiwan.)

  • Jack J. W. Yang

    (Department of Finance, National Yunlin University of Science and 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

Suggested Citation

  • Hueh-Chen Lin & Chin-Sheng Huang & Jack J. W. Yang, 2015. "Market Reaction to Voluntary and Mandatory Announcements of Independent Director Appointments," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 125-135.
    • Handle: RePEc:eco:journ1:2015-01-10
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    References listed on IDEAS

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    Cited by:

    1. Dewa Gede Wirama & I Gusti Bagus Wiksuana & Zuraidah Mohd-Sanusi & Soheil Kazemian, 2017. "Price Manipulation by Dissemination of Rumors: Evidence from the Indonesian Stock Market," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 429-434.
    2. Shivan Sarpal, 2018. "Does Endogeneity in Causal Relationships Matter: A Case of Board Independence and Firm’s Market Valuation," Emerging Economy Studies, International Management Institute, vol. 4(1), pages 19-39, May.

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    More about this item

    Keywords

    Corporate Governance; Board Independence; Independent Director; Mandatory Appointment.;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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