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Board turnover in Taiwan’s public firms: An empirical study

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Abstract

Using a data set of 220 Taiwanese public firms with 2,200 observations over a ten-year period representing Taiwan’s economic takeoff period in the late 1990s, as well as six follow-up interviews conducted with top managers several years hence, this research examines the propensity of an important change variable for firms: the turnover of boards of directors. Specifically, it examines the relationship between board turnover and the organization’s environment, firm performance, and the largest shareholder’s control during a key period of economic transition and growth for Taiwan. The results show that substantial changes in board composition, though still not especially common in Taiwan, do occur, even in closely held companies. Turnover in the board is negatively related to the largest shareholder’s control power as well as firm performance. Board changes however, are not related to the environmental munificence and dynamism. These results are rather consistent with related research on firms in ethnic Chinese communities which suggests that top management and board turnover while not common, does sometimes occur, and more recent institutional and industrial change in Taiwan is likely encouraging further governance reform. This has implications for important facets of firm governance and change, as well as expanding our knowledge about firms domiciled in an ethnic Chinese community, particularly during times of economic transition and growth. Follow-up interviews with four top managers from our sample, along with one consultant and one government official in Taiwan provided additional confirmation and clarification of our results.

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Notes

  1. Here we define a family-controlled business as a firm whose major executives are members of one or several families, and most likely are related to the firm’s founder(s). The families are also major shareholders of the company. In other words, a family-controlled business is owned and controlled by a family or a few families.

  2. This is based on estimates from 2013 Taiwan Stock Exchange Corporation (TWSE) annual statistics reports. During the period of 2000–2012, the average total holding and trading volume of institutional investors increased to 15.69 % and 15.05 %, respectively.

  3. Measurement of munificence: Regression slope coefficient, divided by mean value. Coefficients are based on time regressed against the industry sales. Measurement of dynamism: Standard error of regression slope coefficient divided by the mean value from the same regression model as for munificence.

  4. Although class action suits and other shareholder protection measures consistent with an Anglo-American corporate governance structure are under discussion, definite plans are not yet in place.

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Acknowledgments

This research is supported in part by a grant from the National Science Council (NSC 89-2416-H-029-010) of Taiwan and by an RGC Research Grant Direct Allocation from The Chinese University of Hong Kong (2070465). We thank Shyh-jer Chen, Mike Wright, Michael N. Young, and Nitin Pangarkar for their helpful comments on previous versions of this manuscript, and Saraswathi “Sara” Sabapathy of Springer for her kind help. The authors would also like to thank Marc Ahlstrom of Burlington County College for his editorial and research assistance.

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  1. Department of Business Administration, National Yunlin University of Science and Technology, Yunlin, Taiwan

    Yunshi Liu

  2. Department of Management, Michigan State University, Eli Broad College of Business, 520 N. Business Complex, East Lansing, MI, 48824, USA

    Linda C. Wang

  3. Department of Applied Economics, Shanghai Jiao Tong University, 535 Fahua Zhen Road, Changning District, Shanghai, China, 200052

    Li Zhao

  4. Department of Management, The Chinese University of Hong Kong, Shatin, NT, Hong Kong

    David Ahlstrom

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Liu, Y., Wang, L.C., Zhao, L. et al. Board turnover in Taiwan’s public firms: An empirical study. Asia Pac J Manag 30, 1059–1086 (2013). https://doi.org/10.1007/s10490-013-9363-7

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