Corporate Governance and Foreign Ownership:A Corporate Life Cycle Perspective

• Main Authors: Pei-Yao Lin, 林佩瑤
• Other Authors: Wen-Hua Shen
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/td2whg

碩士 === 國立高雄應用科技大學 === 會計系 === 102 === As corporate governance has been deemed as an important mechanism to form corporate strategy and improve decision quality. The functionality of corporate governance has become a critical part for a company to run its business well. Referring to Kao (2012), this study uses ownership structure and the characteristics of board of directors as two integrated indicators of corporate governance and names the two dimensions as ownership Structure of board of directors and the characteristics of board of directors respectively, to measure each listed-company’s overall corporate governance condition. The aim of this study is to examine whether foreign institutional investors are more likely to invest companies with high corporate governance indicators. Besides, along with the expansion of scope and scale, a company will be able to build a better corporation governance environment. In other words, following the progress of life cycle stages movement from growth, maturity to stagnant stage, a company will be more likely to create a better corporate governance system in order to earn investors’ trust. Thus, we refer to Anthony and Ramesh (1992)’s measurement of enterprise life cycle stage, and classifies listed companies into three life cycle stages: growth stage, maturity stage and stagnant stage. We conjecture that a company at the maturity (stagnant) stage of enterprise life cycle will have a better corporate governance mechanism than those still at growth (maturity) stage of enterprise life cycle and expect that the positive relationship between corporate governance mechanism and foreign institutional investors’ ownership will vary along with a company’s life cycle stage. The empirical results show that foreign institutional investors are more willing to hold a large amount of shares of companies with better integrated corporate governance indicator index and with better ownership structure or with an effective board of directors. Moreover, we find that a company’s life cycle stage will have a moderate effect on the relationship between integrated corporate governance index and foreign institutional investors’ ownership. Especially, the regression results indicate (1) Comparing with companies at maturity stage, the positive relationship between ownership structure and foreign institutional investor’s ownership of companies at stagnant stage of life cycle will be enhanced. (2) Comparing with companies at maturity stage, the positive relationship between the function of board of directors and foreign institutional investor’s ownership of companies at growth stage of life cycle will be weakened. (3) Comparing with companies at maturity stage, the positive relationship between the corporate governance indicator index and foreign institutional investor’s ownership of companies at growth stage of life cycle will be weakened. That means the function of board of director of firm still in growth stage is not a key concern when foreign institutional investors make investment decision until the firm steps into maturity stage. Moreover, comparing with companies at maturity stage, the positive relationship between corporate governance indicator index and foreign institutional investor’s ownership of companies at stagnant stage of life cycle will be enhanced, which implies that foreign institutional investors are more likely to pay more attention to companies’ overall corporate governance indicator index when they are at the stagnant stage of life cycle.