Does the Appointment of Independent Directors Drive Multiple Effects?

The International Journal of Business and Finance Research, v. 8 (1) p. 69-88

20 Pages Posted: 5 Feb 2014

See all articles by Yung‐Chuan Lee

Yung‐Chuan Lee

Asia University

Ming-Chang Wang

National Chung Cheng University - Department of Business Administration

Date Written: 2014

Abstract

We analyze the announcement price behavior of independent director appointments stemming from monitoring, signaling, advising effects and moderating effects of controlling shareholders. Based upon appointments samples made by firms listed on the Taiwan Stock Exchange, we find that the cumulative abnormal returns (CARs) of the announcement of voluntary independent director appointments are significantly higher than those of the announcement of mandatory appointments. This empirical result indicates that the market may well recognize that voluntary appointments of independent directors could represent a signaling vehicle. Our findings also show that the monitoring and advising effects of independent directors has failed under the presence of controlling shareholders.

Keywords: Independent Directors; Monitoring Effect; Signaling Effect; Advising Effect; Controlling Shareholders

JEL Classification: G14; G38

Suggested Citation

Lee, Yung‐Chuan and Wang, Ming-Chang, Does the Appointment of Independent Directors Drive Multiple Effects? (2014). The International Journal of Business and Finance Research, v. 8 (1) p. 69-88, Available at SSRN: https://ssrn.com/abstract=2321750

Yung‐Chuan Lee (Contact Author)

Asia University ( email )

Tokyo 180-8629
Japan

Ming-Chang Wang

National Chung Cheng University - Department of Business Administration ( email )

402 Taiwan
China

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