| Summary: | 碩士 === 國立高雄第一科技大學 === 風險管理與保險研究所 === 101 === Recently, shares collateralized by board of directors get more attention from the management. The main reason is that many companies which use shares collateralized by board shut down during the financial crisis ( Kao and Chiu, 2002) .
According to the Banking Act, the value of shares to be pledged shall accurately be determined based on current price. If the price drops, the directors should repay sufficient shares to be pledged to continue the pledge. Hence, we claim that shares collateralized by board of directors would cause the impact on the convergence of interests effects , which can combine the interests between directors and investors more closely. Accordingly, the banks build a deeper relationship with the companies use shares collateralized, and it results in the debt monitoring effects. These two effects would force the directors devote to monitoring and managing the companies, and further, push up the stock prices and the firm performance.
Our empirical result shows that a negative relation exists between shares collateralized by board of directors and abnormal return or the firm performance, which is consistent with the finding in Chen et al., (2007). Nevertheless, after adding the Market- to-book ratio to the model, we find out that there isn''t such a significant relationship between the above two. It reveals that Market- to-book ratio is a mediator variable. This study also finds the nonlinear relationship between shares collateralized by board of directors and ROA, MTB are existent. Therefore, shares collateralized by board of directors leads to the convergence of interests effects is proved to be real. Although we discover a positive relationship between firm performance and debt ratio, it may caused by risk premium instead of debt monitoring effects.
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