Influence of Independent Directors on Company Performance: Literature Review

• Main Authors: Zeng-Fang Song, 宋增芳
• Other Authors: Yong-Chin Liu
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/92bncw

碩士 === 亞洲大學 === 財務金融學系碩士在職專班 === 103 === American monorail independent director system was formally and expressly introduced in Taiwan in January 2006, and all stock-listed companies have been enforced to set up independent directors since December 2013. The purpose of this study is to explore the positive and negative effects of settings independent directors on corporate performance and value and the influencing factors for the effects. The studying methods are to aggregate, summarize and analyze the relevant literature. The study can provide references for academics, practitioners and authorities, and enhance the quality of corporate governance and corporate value, as well as boom up the capital market. Past literature indicates that the positive effect of setting independent directors is to display active and objective monitoring functions on managers and other certain features, which improve the quality of decision-making and the maximum benefit for company. However, there are some dissenting opinions raised in the literature and they argue that the reasons for the useless of independent director are lack of independence, information asymmetry, poor efficiency of decision-making, part-time, and less incentive to participate; therefore, there is no effectiveness for supervising management of firms. Additionally, from the legal point of view, because the relevant provisions of the Act stipulate the independent directors who object bad resolutions can be held harmless, this would make directors monitor passively and fail to supervise managers effectively. Reviewing the related literature, the independent director system has been widely adopted by advanced countries, and indeed is a good supervisory mechanism in corporate governance. However, it should be paid attention to whether the American independent director system being transplanted to Taiwan might have the situation of not acclimatized. After mandatorily performing, authorities should pay attention to the advantages and disadvantages of setting independent directors, and try to prevent from the drawbacks and to obtain the merits. To perfectly and actively monitoring managers, the authorities should take our traditional business patterns into consideration to develop other legal mechanisms and measures to support it, and think about how to prevent companies from adopting stratagems of convenience which hinder the effectiveness of the system.