Insider Ownership Structure and Firm Performance: a productivity perspective study in Taiwan's electronics industry

Abstract

In the context of agency theory (Jensen and Meckling, 1976. "Journal of Financial Economics", 3, 305-360), how insider stock ownership relates to firm performance is explored in this paper. The relevant performance measure used is total factor productivity. Insiders are classified into executives, board members and blockholders so as to facilitate a detailed study. Five-year (1996-2000) panel data of 333 Taiwanese listed electronics firms are examined. It is observed that total insider ownership remains steady while the executive-to-insider holding ratio increases significantly. In terms of the effect on total factor productivity, neither the total insider ownership nor the board-to-insider holding ratio shows any influence on productivity. However, productivity first decreases then increases with the executive-to-insider holding ratio, forming a U-shaped relationship. The results indicate that stock ownership of top officers in high-tech firms should be encouraged to enhance productivity. Copyright Blackwell Publishing Ltd 2005.

Are OECD-prescribed “good corporate governance practices” really good in an emerging economy?

“…The other proxy, which does not exist in most emerging economies, is value differences among multiple classes of shares (DeAngelo & DeAngelo, 1985;Lease, McConnell, & Mikkelsen, 1984;Rydqvist, 1987). 2 Other studies that use the indirect approach include Bertrand, Mehta, and Mullainathan (2002) and Selarka (2005) on India, Song, Ali, and Pillay (2007) on Malaysia, Bae, Kang, and Kim (2002) on South Korea, Delios, Wu, and Zhou (2006) and Sheu and Yang (2005) on Taiwan, and Mitton (2002) and Lins (2003) on Indonesia, the Philippines, Sri Lanka, Thailand, and others. cash rights in the controlled affiliates (Almeida & Wolfenzon, 2006;Levy, 2009;Morck et al, 2005;.…”

The Measurements of Firm Performance’s Dimensions

“…Sheu & Yang, 2005;Bozec & Dia, 2007;Destefanis & Sena, 2007;Lin et al, 2009;& Garcia-Sanchez, 2010). This is because the main element of business organization is its operation function which refers to the transformation of inputs into outputs, and wherein efficiency is very significant (Sheu & Yang, 2005).…”

“…Nevertheless, no specific Recently, special attention has been dedicated to determining the corporate governance effectiveness through different measurement of firm performance, one that is related to the production process, namely technical efficiency (e.g. Sheu & Yang, 2005;Bozec & Dia, 2007;Destefanis & Sena, 2007;Lin et al, 2009;& Garcia-Sanchez, 2010). This is because the main element of business organization is its operation function which refers to the transformation of inputs into outputs, and wherein efficiency is very significant (Sheu & Yang, 2005).…”

The Shareholder–Manager Relationship and Its Impact on the Likelihood of Firm Bribery

“…As a result, the value of the firm is below the optimum that could be achieved if the owner would act as the manager. Prior empirical study in corporate governance research has confirmed that separation of ownership and control decreases firm performance, as does a smaller percentage of equity held by management (e.g., Mehran 1995;Agrawal and Knoeber 1996;Core et al 1999;Anderson and Reeb 2003;Sheu and Yang 2005;Andres 2008). Jensen and Meckling (1976) argue that managers' natural inclination is to allocate the firm's resources in their own best interest, which may be in conflict with that of the shareholders.…”

“…Agrawal and Knoeber (1996) revealed that greater insider shareholding improves firm performance measured by Tobin's Q. Sheu and Yang (2005) have shown that higher equity ownership of top executive officers increases technical efficiency in Taiwanese high-tech firms. Andres (2008) reported that a firm with large family ownership performs better than firms with other block-holder ownerships, because agency costs can be reduced as the owner and manager roles are in a single hand (or, at least, on close distance by having family members as managers).…”