Arranging Independent Directors to Enhance Post-IPO Performance: Taiwan Evidence

• Main Authors: Yi-yueh Chen, 陳怡月
• Other Authors: none
• Format: Others
• Language: en_US
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/67780855130682458745

碩士 === 靜宜大學 === 財務金融研究所 === 96 === The system of independent director has been introduced in Taiwan since 2002. All companies that go for initial public offering (IPO) in Taiwan are required to arrange at least two of board seats to independent directors. Our purpose is to investigate whether the arrangement of independent director can mitigate the post-IPO underperformance. We employ cumulated abnormal returns (CARs) and buy-and-hold abnormal return (BHAR) to measure the long-term performance of 467 Taiwan IPOs between 1999 and 2004. Both CARs and BHAR are calculated related to calendar-time portfolio. The empirical evidence shows that, on average, IPOs underperform in Taiwan. Most importantly, we find that IPOs with independence directors perform better than others, indicating that the independent directors have a positive effect on IPOs’long-term performance. Further tests show that the positive effect of independence director is mostly focused on IPOs in electronic industry, backed by VC or with low growth opportunity. Results are similar irrespective of whether we use CARs or BHAR.