Relevant between average tenure of the independent directors and cash dividend payout rate-Free cash flow hypothesis

• Main Authors: Hsin-wen Tsao, 曹馨文
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/63162688770260773970

碩士 === 東吳大學 === 會計學系 === 100 === Most of the listed companies in Taiwan possess the nature of family business, and the board members are mostly build up with majority shareholders or their designated representatives which resulted that the shareholders controlling and agency problems and the monitoring mechanisms of the board is restricted, so bringing in the independent director mechanism can be expected to improve the representatives issues. In the past, most of the researches focus on the relevancies between operating performance and earnings management with build up the independent directors’ mechanism, but few in how the tenure of independent directors affected the board’s agency and monitoring functions. My research was to find out whether fund agency problem of the corporate would be affected by the "professional competence" and "independence" monitoring due to the tenure length of independent directors. The free cash flow hypothesis indicated that the low growth opportunities with high free cash flow easily to raise the fund agency problems, and if the corporate could improve the cash dividend payment rate then the fund agency issues will be slow down. Therefore, my study will to explore whether the average tenure length of the independent directors can have an impact on corporate governance mechanisms or not, which can prompt the board to improve the cash dividend payout ratio thereby to slow down the fund agency problems. In my study, using the end of 2010 listed low growth opportunity and high free cash flow companies with independent directors as the study sample to explore the relevance between average tenure of independent directors and cash dividend payout rate during 2002 - 2010. The empirical results found that due to the offset effects between professionalism and independence resulting in no significant relevance between average tenure length of the independent directors and cash dividend payout rate of the low growth opportunities and high free cash flow listed company. The other reason maybe that the cash dividends payout rate of the low growth opportunities and high free cash flow listed companies were already high, even though the independent directors did really improve its oversight functions of the companies to increase the cash dividend payout rate, because of its less influential than other factors, the relevant between average tenure of the independent directors and cash dividend payout rate is not obvious.