||Is there any requirement for the optimal governance system in Taiwan? Without focusing on the pure relationship with variable and index, the study started from developing a model to explain the sample in Taiwan|
We try to simulate the corporate governance mechanisms from the idea of John and Kedia (2003). The three primary forces came from (1)aligning the manager’s incentives with that of shareholders,(2) monitored debt, and (3) takeovers. In the model, we divided the sample of Taiwan listed company in 1996-2004 into four groups: Alignment-Based(AB),Pre-Commitment-Based(PB),Intervention-Based(IB) and Well-Divided(WD). From our observation, the ratio of IB company is arising, AB and PB are decreasing. Therefore, we infer that the external governance mechanisms are well developing in Taiwan, like external shareholder and takeover markets. Also, we established the transformative model of governance system in order to explain the index variation result from changing in governance system.
Past study indicated that the governance systems in Taiwan are family-based systems. We found that the external and intervening mechanism, growing with the developing financial market, could be more powerful in corporate governance today.