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Board composition, corporate ownership and market performance: evidence from Taiwan

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  • Yi-Mien Lin
  • Yen-Yu Liu
  • Shwu-Jen You
  • Jung-Yuan Shiu

Abstract

This article examines the effects of ultimate controlling shareholders’ ownership and board involvement on market liquidity and volatility using data from the Taiwan's market. We find that when a firm's ultimate controlling shareholder holds more control rights and is more involved on the board, and when there is a larger divergence between ultimate control and ownership as well as a larger divergence between controlling shareholders’ cash-flow rights and their board representation, the governance function would be less effective, leading to lower stock liquidity and higher idiosyncratic volatility. We also find that firms controlled by business groups have poor performance of the two market metrics. Furthermore, outside independent directors do not have significant effects on market liquidity and volatility, probably due to too small representation on the board to have effective monitoring.

Suggested Citation

  • Yi-Mien Lin & Yen-Yu Liu & Shwu-Jen You & Jung-Yuan Shiu, 2012. "Board composition, corporate ownership and market performance: evidence from Taiwan," Applied Financial Economics, Taylor & Francis Journals, vol. 22(14), pages 1193-1206, July.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:14:p:1193-1206
    DOI: 10.1080/09603107.2011.641926
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    Cited by:

    1. Shah, Muhammad Hashim & Xiao, Zuoping & Abdullah, & Quresh, Shakir & Ahmad, Mushtaq, 2020. "Internal pyramid structure, contract enforcement, minority investor protection, and firms’ performance: Evidence from emerging economies," Research in International Business and Finance, Elsevier, vol. 52(C).
    2. Teng-Shih Wang & Yi-Mien Lin & Chin-Fang Chao, 2013. "Board independence, executive compensation and restatement," Applied Financial Economics, Taylor & Francis Journals, vol. 23(11), pages 963-975, June.
    3. Jean-michel Sahut & Medhi Mili & Sana Ben Tekaya & Frédéric Teulon, 2016. "Financial Impacts and antecedents of CSR: a PLS Path Modelling Approach," Economics Bulletin, AccessEcon, vol. 36(2), pages 736-751.

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