Analysis of Board Structure,Corporate Value and Financial Policy

Abstract

The purpose of this paper is to examine how board structure relates to corporate value and financial policy of firms in Taiwan. Using quarterly data from ten stock-listed department stores in Taiwan during the period 2000-2005, this study builds a structural model with three equation sets, and then applies three-stage least squares (3SLS) to estimate all equations in the model simultaneously. It should be emphasized that all empirical deviations of normal asymptotic properties caused by OLS or 2SLS in the previous studies can be improved by 3SLS, even though the model of this study contains lagged endogenous variables. The empirical results finally show that most factors of board structure affect significantly corporate value and financial policy in the current period, except for the factor of Internal Board Shareholding Ratio with the significant effects in a time lag of one quarter.

Keywords: board structure, corporate value, financial policy, three-stage least squares (3SLS)

JEL Classification: G32, G30