| Summary: | 碩士 === 東吳大學 === 會計學系 === 106 === Taiwan’s government has vigorously promoted independent director system to ensure the quality of financial reports and to reduce agency cost over a decade. However, whether the change in the number of independent directors will affect the quality of financial reports and further to affect stock prices, is still unknown. Therefore, the purpose of this study is to explore three research topics: First, when the purpose for increasing the number of independent directors is to establish an audit committee, would the company’s ERC be higher than the non-establish ones? Second, would a company’s ERC decrease if independent directors resign? Third, When the company returns the independent directors from a by-election, would the company’s ERC increase?
This study collects 1,872 samples of changes in the quality of independent directors from a company listed on the stock exchange and over-the-counter markets in Taiwan from 2011 to 2017 for empirical testing. The empirical results indicate that the company’s earnings were related to their stock price although the company changed the number of independent directors. In addition, increasing the number of independent directors to establish an audit committee significantly increases the ERC, and investors believe that audit committee could improve the quality of financial reports. However, evidence to indicate whether investors would consider the audit committee to affect the quality of financial reports and that changes in ERC occur when independent directors resign or through a by-election is insufficient. This study only finds that investors have a negative evaluation when independent directors resign.
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