Hostname: page-component-cd9895bd7-q99xh Total loading time: 0 Render date: 2024-12-23T04:58:55.908Z Has data issue: false hasContentIssue false
  • English
  • Français

Board, ownership and performance of banks with a dual board system: Evidence from Taiwan

Published online by Cambridge University Press:  02 February 2015

Chi-Jui Huang
Chi-Jui Huang*
Affiliation:
Assistant Professor, Department of Banking and Cooperative Management, National Taipei University, Taiwan
Get access Rights & Permissions [Opens in a new window]

Abstract

The influence of corporate governance on a firm's performance has recently been studied in industrial enterprises in developed countries, but not in services such as banks with a dual board system in Asia's newly-industrialized economies (NIEs). This research examines the effects of board structure and ownership on a bank's performance using a sample of 41 commercial banks in an Asian NIE (Taiwan). Results showed that board size, numbers of outside directors, and family-owned shares are positively associated with bank performance, whereas the number of supervisory directors has a negative influence on performance. The findings provide empirical support for corporate governance, which improves the performance of banks with a dual board system in Taiwan.

Keywords

dual boardsownershipfinancial performancecorporate governancesupervisory boardTaiwan
Type
Research Article
Information
Journal of Management & Organization , Volume 16 , Issue 2 , May 2010 , pp. 219 - 234
Copyright
Copyright © Cambridge University Press and Australian and New Zealand Academy of Management 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adams, R and Mehran, H (2003) Is corporate governance different for bank holding companies? Economic Policy Review 9: 123–142.Google Scholar
Asia-Pacific Economic Cooperation (1998) Tenth APEC Ministerial Meeting Joint Statement, accessed at http://www.apec.org/apec/ministerial_statements/annual_ministerial/1998_10th_apec_ministerial.html on 14-15 11 1998.Google Scholar
Baysinger, B and Hoskisson, RE (1990) The composition of boards of directors and strategic control: Effects on corporate strategy, Academy of Management Review 15: 72–87.Google Scholar
Basel Committee on Banking Supervision (2006) Enhancing corporate governance for banking organizations.Google Scholar
Bonn, I (2004) Board structure and firm performance: evidence from Australia, Journal of the Australian and New Zealand Academy of Management 10(1): 14–24.Google Scholar
Booth, JR, Cornett, MM and Tehranian, H (2002) Boards of directors, ownership, and Regulation, Journal of Banking & Finance 26(10):1973–1996.Google Scholar
Bushman, RM & Smith, AJ (2003) Transparency, financial accounting information, and corporate governance, Economic Policy Review – Federal Reserve Bank of New York, 9:65–87.Google Scholar
Chen, A, Kao, L, Tsao, M and Wu, C (2007) Building a corporate governance index from the perspectives of ownership and leadership for firms in Taiwan, Corporate Governance: An International Review 15(2): 251–261.Google Scholar
Chiang, MH and Lin, JH (2007) The relationship between corporate governance and firm productivity: evidence from Taiwan's manufacturing firms, Corporate Governance: An International Review 15(5): 768–779.Google Scholar
Chiu, YH, Hu, JL and Li, Y (2002) Cost inefficiency of Taiwan's mixed enterprises, In Productivity and economic performance in the Asia-Pacific region. (Eds) Cheltenham: Edward Elgar, pp. 208–228.Google Scholar
Cho, DS and Kim, J (2007) Outside directors, ownership structure and firm profitability in Korea, Corporate Governance: An International Review 15(2): 239–250.Google Scholar
Chotigeat, T, Kramer, S and Pyun, CS (2004) Efficiency and resilience of French multinational banks: evidence from the Pre-Euro era, The Multinational Business Review 12(1): 3–17.Google Scholar
Cohen, WM (1996) Firm size and the nature of innovation within industries: the case of process and product R&D, Review of Economics & Statistics 78(2): 232–243.Google Scholar
Colley, JL Jr, Jacqueline, L, Doyle, G, Logan, W and Wallace, S (2005) What is corporate governance? McGraw-Hill, New York.Google Scholar
Dahya, J, Karbhari, Y, Xiao, JZ and Yang, M (2003) The usefulness of the supervisory board report in China, Corporate Governance: An International Review 11(4): 308–321.Google Scholar
Daily, CM, Johnson, JL and Dalton, DR (1999) On the measurements of board composition: Poor consistency and a serious mismatch of theory and operationalizations, Decision Sciences 30(1): 83–106.Google Scholar
Dalton, DR, Ellstrand, AE, Daily, CM and Johnson, JL (1998) Meta-analytic reviews of board composition, leadership structure, and financial performance, Strategic Management Journal 19: 269–290.Google Scholar
Dalton, DR, Daily, CM, Johnson, JL and Ellstrand, AE (1999) Number of directors and financial performance: a meta-analysis, Academy of Management Journal 42(6): 674–686.Google Scholar
Dalton, DR and Kesner, IF (1987) Composition and CEO duality in boards of directors: an international perspective, Journal of International Business Studies 18(3): 33–42.Google Scholar
Davidson, WN III and Rowe, W (2004) Intertemporal endogeneity in board composition and financial performance, Corporate Ownership & Control 1(4): 49–60.Google Scholar
Earle, JS, Kucsera, C and Telegdy, A (2005) Ownership concentration and corporate performance on the Budapest stock exchange: Do too many cooks spoil the goulash? Corporate Governance: An International Review 13(2): 254–264.Google Scholar
Eisenberg, T, Sundgren, S and Wells, M (1998) Larger board size and decreasing firm value in small firms, Journal of Financial Economics 48: 35–54.Google Scholar
Fama, E (1980) Agency problems and the theory of the firm, Journal of Political Economy 88: 288–307.Google Scholar
Fama, E and Jensen, M (1983) Separation of ownership and control, Journal of Law and Economics 26: 301–325.Google Scholar
Finegold, D, Benson, GS and Hecht, D (2007) Corporate boards and company performance: review of research in light of recent reforms, Corporate Governance: An International Review 15(5): 865–78.Google Scholar
Forbes, DP and Milliken, FJ (1999) Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups, Academy of Management Review 24: 489–505.Google Scholar
Goodstein, J, Gautam, K and Boeker, W (1994) The effects of board size and diversity on strategic change,Strategic Management Journal 15: 241–250.Google Scholar
Hagendorff, J, Collins, M and Keasey, K (2007) Bank governance and acquisition performance, Corporate Governance: An International Review 15(5): 957–68.Google Scholar
Her, MM and Mahajan, A (2005) Family control, two-tier boards and firm performance lessons from the Taiwanese experience, Journal of Asia-Pacific Business 6(2): 69–89.Google Scholar
Jensen, MC and Meckling, WH (1976) Theory of the firm: managerial behavior, agency cost, and ownership structure, Journal of Financial Economics 3: 305–60.Google Scholar
Jensen, M (1993) The modern industrial revolution, exit, and the failure of internal control systems, The Journal of Finance 48: 831–80.Google Scholar
Johnson, JL, Daily, C and Ellstrand, A (1996) Boards of directors: a review and research agenda, Journal of Management 22: 409–38.Google Scholar
Katrishen, FA and Scordis, NA (1998) Economies of scale in services: a study of multinational insurers, Journal of International Business Studies 29(2): 305–27.Google Scholar
Kesner, I (1987) Directors' Stock Ownership and organizational performance: An Investigation of Fortune 500 Companies, Journal of Management 13(3): 499–507.Google Scholar
Kim, Y (2005) Board network characteristics and firm performance in Korea, Corporate Governance: An International Review 13(6): 800–808.Google Scholar
Kutner, MH, Nachtsheim, CJ and Neter, J (2004) Applied linear regression models, (4th edn) McGraw-Hill Irwin.Google Scholar
La Porta, R, Lopez-De-Silanes, F, Shleifer, A and Vishny, R (1998) Law and Finance, Journal of Political Economy 106: 1115–1155.Google Scholar
La Porta, R, Lopez-De-Silanes, F and Shleifer, A (1999) Corporate ownership around the world, The Journal of Finance 54(2): 471–517.Google Scholar
La Porta, R, Lopez-De-Silanes, F, Shleifer, A and Vishny, R (2000) Investor protection and corporate governance, Journal of Financial Economics 58: 3–27.Google Scholar
Lee, TS and Yeh, YH (2004) Corporate governance and financial distress: evidence from Taiwan, Corporate Governance: An International Review 12(3): 378–388.Google Scholar
Lehmann, E and Weigand, J (2000) Does the governed corporation perform better? Governance structures and corporate performance in Germany, European Finance Review 4: 157–95.Google Scholar
Levine, R (1997) Financial development and economic growth: views and agenda, Journal of Economic Literature 35: 688–726.Google Scholar
Li, Y, Hu, JL and Chiu, YH (2004) Ownership and production efficiency: Evidence from Taiwanese Banks, The Service Industries Journal 24(4): 129–148.Google Scholar
Lin, (2005) Corporate governance, leadership structure and CEO compensation: evidence from Taiwan, Corporate Governance: An International Review 13(6): 824–35.Google Scholar
Luan, CJ and Tang, MJ (2007) Where is independent director efficacy? Corporate Governance: An International Review 15(4): 636–43.Google Scholar
Nietsch, M (2005) Corporate governance and company law reform: a German perspective, Corporate Governance: An International Review 13(3): 368–76.Google Scholar
Mallin, C, Mullineux, A and Wihlborg, C (2005) The financial sector and corporate governance: the UK case, Corporate Governance: An International Review 13(4): 532–41.Google Scholar
Massen, GF and van den Bosch, FAJ (1999) On the supposed independence of two-tier boards: formal structure and reality in the Netherlands. Corporate Governance: An International Review 7(1): 31–37.Google Scholar
Morgan, DP (2002) Rating banks: risk and uncertainty in an opaque industry, The American Economic Review 92: 874–88.Google Scholar
Nicholson, GJ and Kiel, GC (2007) Can directors impact performance? A case-based test of three theories of Corporate Governance, Corporate Governance: An International Review 15(4): 585–607.Google Scholar
OECD (Organisation for Economic Co-operation and Development) (2004) OECDPrinciples of Corporate Governance, OECD Publications, Paris.Google Scholar
Pan, Y, Li, S and Tse, DK (1999) The impact of order and mode of market entry on profitability and market share, Journal of International Business Studies 30(1): 81–104.Google Scholar
Peng, MW (2004) Outside directors and firm performance during institutional transitions, Strategic Management Journal 25:453–471.Google Scholar
Rhoades, DL, Rechner, PL and Sundarmurthy, C (2000) Board composition and financial performance: a meta-analysis of the influence of outside directors, Journal of Managerial Issues 12(1): 76–91.Google Scholar
Rose, C (2005) The composition of semi-two-tier corporate boards and firm performance, Corporate Governance: An International Review 13(5): 691–701.Google Scholar
Sánchez-Ballesta, JP and Garcia-Meca, E (2007) A meta-analytic vision of the effect of ownership structure on firm performance, Corporate Governance: An International Review 15(5): 879–93.Google Scholar
Schilling, F (2001) Corporate governance in Germany: the move to shareholder value, Corporate Governance: An International Review 9(3): 148–51.Google Scholar
Short, H and Keasey, K (1999) Managerial ownership and the performance of firms: Evidence from the UK, Journal of Corporate Finance 5: 79–101.Google Scholar
Simpson, WG and Kohers, T (2002) The link between corporate social and financial performance: evidence from the banking industry, Journal of Business Ethics 35(2): 97–109.Google Scholar
Smith, KG, Guthrie, JP and Chen, MJ (1989) Strategy, size and performance, Organization Studies 10(1): 63–81.Google Scholar
Verreynne, ML (2006) Strategy-making process and firm performance in small firms, Journal of Management & Organization 12(3): 209–22.Google Scholar
Yeh, Y H, Lee, TS and Woidtke, T (2007) Family control and corporate governance: evidence from Taiwan, International Review of Finance 2: 21–48.Google Scholar
Zattoni, A and Cuomo, F (2008) Why adopt codes of good governance? A comparison of institutional and efficiency perspectives, Corporate Governance: An International Review 16 (1): 1–15.Google Scholar