Hu, Fang-tzu

As a series of financial crisis and accounting scandals occur around the world, the government, many institutions and the public have put great emphasis on corporate governance. Most of the prior research focus on how the corporate governance monitoring system can enhance the firm value and reduce the financial crisis.
This empirical analysis includes investment opportunity set (IOS) as an environmental factor and tests the interaction between IOS, firm performance and external corporate governance mechanisms (audit quality and institutional investor ownership) as well as internal corporate governance mechanisms (CEO duality and pledged shares ratio of directors and supervisors) in Taiwan.
The sample consists of 999 Taiwan publicly listed companies both in electronics industry and non-electronics industries in 2003. This empirical study uses common factor analysis, Pearson\ue2s correlation analysis and regression analysis to test four hypotheses.
The hypotheses are as follows: (1) the relationship between IOS and firm performance will be affected if the auditor is from the Big 4 auditing firm. (2) The relationship between IOS and firm performance will be changed due to the institutional investor ownership. (3) The CEO duality will influence the relationship between IOS and firm performance. (4) The pledged shares ratio of directors and supervisors has an influence on the relationship between IOS and firm performance.
The results show that audit quality has no influence on the association of IOS and firm performance, but the institutional investor ownership has a negative and significant influence on that relationship. In non-electronics industries, CEO duality won\ue2t change the firm performance but a negative influence is reported in this study.
Eventually, while many companies with financial distress have a higher pledged shares ratio than other normal companies, a positive influence is shown in this study when the investment opportunity set is considered

The Effects of External and Internal Corporate Governance Mechanisms on Investment Opportunity Set and Firm Performance

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