Re-examining the Rationality of the Capital Maintenance Principle from the Perspective of Cost of Debt

• Main Authors: You-Ting Chiang, 江佑庭
• Other Authors: Taychang Wang
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/a3z3zk

碩士 === 國立臺灣大學 === 會計學研究所 === 107 === There has been an ongoing dispute throughout the world regarding the Capital Maintenance Principle. Some suggest that through the restrictive measure on the usage of company capital established under this principle will have some effect on reducing the “financial agency cost” generated by the conflict of interest among creditors and shareholders. This would also in some extent provide a minimum protection to the creditors especially for creditors with a weaker bargaining power. However, others suggest that the conflict of interest among the creditors and shareholders can be reduced merely through contracting and the need of regulation intervention will be unnecessary. Even if the need of regulation has been approved, the unified measure taken under the Capital Maintenance Principle would not be a relevant protection to the creditors, since both creditors and companies comes in heterogeneous forms. Ignoring this critical aspect of the contracting bodies by implementing a regulation lacking elasticity, not only is it irrelevant to most of the creditors, it also increases the barrier for companies that are in need of capital usage. Since the Taiwanese company law has also adopted numerous restrictive measures under the Capital Maintenance Principle, this paper wish to test the feasibility of certain items used under these restrictions, namely Capital Stock, Dividend Declare Rate and Legal Reserve. By comparing these items to the cost of debt measured by the INTEXP, we discovered that the effect of Capital Stock is not significant, thus a regulation reform concerning the Capital Stock restriction should be in place；whereas Dividend Declare Rate and Legal Reserve has a significant effect on cost of debt, however whether these restrictive measures are adequate remain unresolved and would require further research to shed light on these issues.