As a series of financial crisis and accounting scandals occur around the world, the government, many institutions and the public have put great emphasis on corporate governance. Most of the prior research focus on how the corporate governance monitoring system can enhance the firm value and reduce the financial crisis. This empirical analysis includes investment opportunity set (IOS) as an environmental factor and tests the interaction between IOS, firm performance and external corporate governance mechanisms (audit quality and institutional investor ownership) as well as internal corporate governance mechanisms (CEO duality and pledged shares ratio of directors and supervisors) in Taiwan. The sample consists of 999 Taiwan publicly listed companies both in electronics industry and non-electronics industries in 2003. This empirical study uses common factor analysis, Pearson¡¦s correlation analysis and regression analysis to test four hypotheses. The hypotheses are as follows: (1) the relationship between IOS and firm performance will be affected if the auditor is from the Big 4 auditing firm. (2) The relationship between IOS and firm performance will be changed due to the institutional investor ownership. (3) The CEO duality will influence the relationship between IOS and firm performance. (4) The pledged shares ratio of directors and supervisors has an influence on the relationship between IOS and firm performance. The results show that audit quality has no influence on the association of IOS and firm performance, but the institutional investor ownership has a negative and significant influence on that relationship. In non-electronics industries, CEO duality won¡¦t change the firm performance but a negative influence is reported in this study. Eventually, while many companies with financial distress have a higher pledged shares ratio than other normal companies, a positive influence is shown in this study when the investment opportunity set is considered.

The investment opportunity set was the component of the organisation’s value resulting from the option to make future investments or growth opportunity. The value of an organisation comprised of assets in place and discretionary investments in positive net present value projects or growth opportunity. This investment opportunity set or growth opportunity was relevant to both the organisation and the economy for value creation. The discretionary investments included any discretionary expenditure necessary for the future growth the organisation and were packaged as policy decisions. This study elected debt policies, dividend policies, and broad-based empowerment shareholding as relevant policy decisions with the purpose of establishing the relationship between these policies and growth opportunity. This study was conducted over a five year period at company-level and industry-level. T-tests, correlation and regression tests were employed to explore the relationship between the variables. The results revealed that debt and growth opportunity was positively associated; dividend and growth opportunity was negatively associated although the evidence was weak; and black economic shareholding was negatively associated with growth opportunity and positively associated with assets in place. / Dissertation (MBA)--University of Pretoria, 2013. / Gordon Institute of Business Science (GIBS) / unrestricted