Corporate Governance in Government-Linked Companies - Control Driven Or Performance Driven?

34 Pages Posted: 6 Mar 2007

See all articles by Tai Ma

Tai Ma

National Sun Yat-sen University

Hsin-Yi Yu

University of Edinburgh


We study the effect of the government transition on firm performance and board composition of government-linked companies (GLCs) and explore the motivations of board restructuring of GLCs. Specifically, we examine two questions: (1) what is the motivation of board restructuring, and (2) whether the change in the board composition affects the subsequent firm performance. The empirical results indicate that the policy factor is the key determinant in the board re-election of GLCs. The motivation of board restructuring after the powershift is mainly for control and spoils purposes rather than performance enhancement, which may explain why the market reacts negatively to the board restructuring announcement in GLCs. Finally, none of the board restructuring factors can explain the change in firm performance after the powershift, the only significant factor is the policy factor.

Keywords: Power Transition, Board Structure, Spoil System, Government-Linked Companies

JEL Classification: G34

Suggested Citation

Ma, Tai and Yu, Hsin-Yi, Corporate Governance in Government-Linked Companies - Control Driven Or Performance Driven?. Available at SSRN: or

Tai Ma (Contact Author)

National Sun Yat-sen University ( email )

70 Lien-hai Rd.
Kaohsiung, 80743
886-7-525-2000 ext. 4810 (Phone)
886-7-525-4899 (Fax)


Hsin-Yi Yu

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

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