| Summary: | 博士 === 雲林科技大學 === 管理研究所博士班 === 96 === In this paper, we examine the value of outsiders by voting behavior of boards. We first construct a theoretic model to explain the effect of different proportion of outsiders with monitoring incentives to the voting behavior of the boards. Our model proves that boards with a majority of trustworthy but uninformed outsiders can implement institutionally preferred policies and augment corporate performance by upgrading resource allocation. Our laboratory experiments strongly support this conclusion that higher proportion of appointed outsiders yield more efficient boards. Next, under information asymmetry within the directors, the outsider-dominated boards to policy will be anticipated by the aspect of “preventing corporate value discount”. It means that bad policy will be rejected. Furthermore, this paper shows the outsider-dominated boards to policy will be anticipated by the aspect of “insider directors information transmission”, if the outsiders have enough time in their position and less information asymmetry. It means that good policy will be accepted.
Secondly, we also construct the other theoretic model to explain the effect of labor market of outsiders without monitoring incentives to the voting behavior of the boards. We model the voting behavior of boards to demonstrate that the inside directors, whose incentives are not aligned with those of the institution, may propose to bribe outside directors so as to obtain more private benefits, and the key factor of whether outsiders will accept the bribe depend on the effect of labor market for outsiders. We verify that the higher effect of labor market for outsiders, the more effectiveness of the boards. Further, we examine the differences of board vote consistency with strategic equilibrium outcomes across the different degree of outsiders’ labor market effect. We find that board is more likely to execute efficient governance equilibrium and only approve good quality projects when the effect of labor market is high.
We also find outsider-dominated boards, given enough time, will reduce information asymmetry among directors and thereby execute institutionally preferred policies. In addition, theoretically and empirically, the arguments to link between outsiders and effective of boards are mixed in prior studies. However, our theoretic models and laboratory experiments strongly support this conclusion that outside directors can achieve improvement in governance practices by itself, when outsiders’ labor market is well developed.
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