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Independent Directors and the Long-run Performance of IPOs

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  • Tsai-Ling Liao
  • Min-Teh Yu
  • Chih-Jen Huang

Abstract

The Securities and Futures Bureau (SFB) of Taiwan prescribes that firms applying for an initial listing after February 2002 must have at least two seats of independent directors (IDs) on the board. Under the SFB 2002 rules, this paper investigates the effect of such governance reforms in ID requirement on the long-run performance of IPOs. Our results, based on 494 IPOs between 1999 and 2005, find that though IPOs typically underperform in the post-issue period, firms after 2002 perform better than those before 2002. Moreover, firms with IDs also experience less negative stock performance than those without IDs. The results further suggest a positive association between the proportion of IDs on corporate boards and post-listing stock performance for IPOs after 2002.

Suggested Citation

  • Tsai-Ling Liao & Min-Teh Yu & Chih-Jen Huang, 2011. "Independent Directors and the Long-run Performance of IPOs," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 1(4), pages 1-6.
    • Handle: RePEc:spt:apfiba:v:1:y:2011:i:4:f:1_4_6
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    Cited by:

    1. Lewellyn, Krista B. & Bao, Shuji ‘Rosey’, 2014. "A cross-national investigation of IPO activity: The role of formal institutions and national culture," International Business Review, Elsevier, vol. 23(6), pages 1167-1178.
    2. Adel BOUBAKER & Mediha MEZHOUD, 2012. "Impact Of Internal Governance Mechanisms On The Ipo Long Term Performance," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 10, pages 129-146, December.

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