The corporate governance is the extensive framework which applies to reach enterprise business goal in the recent years. Due to the south-eastern Asia financial crisis in 1997, it indicated the distinct defects of the enterprise system. The government and some institutions had to address the principles of the corporate governance and enhance the efficiency of the corporate governance. The essays we discuss are from the strategic corporate governance viewpoint respectively by chapters. The second chapter briefs the basic content of the corporate governance theories. The third chapter based on the theories of the stakeholder theories, we raise the selection models of the corporate governance structure from the viewpoint of the state-contingent ownership, risk taking and ethics, respectively. Due to the differences in politics, economic and cultures from countries, there would be different corporate governance structure. In the fourth chapter, based on the principal-agent theory, we analyze the principal-agent behavior between the owner and the operator under the centralized and dispersal ownership structure conditions, respectively. It gets the Nash equilibrium, which relates with the manager¡¦s rewards, the manager¡¦s punishment and the monitoring cost. The manager¡¦s motivation and rewards should combine with the granting rewards and punitive sanction. The fifth chapter is the example of outsourcing. Based on the transaction cost from the viewpoint of the enterprise core competence, it establishes the outsourcing governance model from the cost of outsourcing and the benefit of the enterprise core competence, and derives the six different outsourcing governance models from the four different conditions. Under the different conditions, it displays the dynamic viewpoint between the internal resources and core competence of the enterprise. In the sixth chapter, it takes the domestic semi-conductor industry as the example to compare the domestic development of the semiconductor industry with Korea¡¦s. There are a lot of differences in politics, economic, culture and the industrial structure between these two countries. My country takes the vertical specialization, but Korean takes the vertical integration. Moreover, TSMC and UMC cases help to elaborate the transaction cost, the development of the corporate governance, and the ownership structure. Management considers the input and the output and stresses on the efficiency of business operation. The governance starts from the ethics and accountability, emphasizes the information transparency and social responsibility, the protection of the stakeholders¡¦ interest. Therefore, the corporate has to adopt the good corporate governance structure under the framework of ethics-thinking, ensure the interest of stakeholder, and create the more business value.

This dissertation consists of three essays in corporate governance. The first essay, titled ¡§Control or Invest: Complex Interests of Managerial Stockholdings¡¨ examines the structural relation between managerial ownership and firm performance. By using simultaneous equation models and considering the complex interests of management, our results show that complicated mutual effects exist between managerial ownership and firm performance. In diffused ownership structure (0-13%), better firm performance may induce management to hold more stockholding, indicating possible investment purpose that is not addressed in previous studies. Management with mid-range of stockholdings (13%-50%), have positive effect on firm performance but not vice versa, which agrees with the ¡§convergence-of-interest hypothesis¡¨. For highly concentrated ownership structure (>50%), negative mutual effect exists, which agrees with the ¡§entrenchment hypothesis¡¨, giving notice to protect minority shareholders. The second essay, titled ¡§The Discrepancy of R&D Expenditure, Ownership Structure and Performance between Electronic and Non-electronic Industries¡¨ addresses on the mutual effects among R&D expenditure, ownership structure and firm performance in electronic industry. The characteristics of high research expenditure, high performance, and stock-based compensation plan of electronic industry may exaggerate the mutual effects between these three factors than companies in non-electronic industry. The empirical evidence first shows that better firm performance will result in higher managerial equity in both electronic and non-electronic industries. Another finding is that electronic industry has higher and more stable research expenditure, no matter firm¡¦s performance; while non-electronic industry spends more in research only when the firm is doing well. The third essay, ¡§The Adjustment and Determination of Ownership Change¡¨, is used to examine the equilibrium hypothesis regarding managerial ownership variation. The equilibrium hypothesis assumes that managers will continuously re-optimize their ownership to maximize firm¡¦s value. In this essay, instead of studying the cross-sectional relationship between managerial ownership and firm performance, we use a dynamic setting to examine how managers adjust their ownership over time and what factors will determine the within firm variation. It is shown that there is small within firm variation in managerial ownership with strong mean-reversion adjustment the entire sample. The results also show that firm characteristics like debt ratio, R&D expenditure and operating income do not relate significantly to within firm variation, but firm performance and institutional parameters like the reselection of board members, stock turnover and ownership level do. This thesis contributes to provide investment purpose as an alternative explanation for insiders¡¦ stockholding, in addition to the expropriation activities that is major concern in prior studies. The change analysis further provides more understanding of within firm variation vertically that is still vague in the literature (HHP, 1999). These new findings add knowledge to managerial ownership in emerging market like Taiwan. The managerial implication is that investors may not fully depend on manager¡¦s self-discipline to solve agency problem. Outside supervision, including independent board member and supervisor, institutional investors and corporate governance evaluation, could be emphasized to reinforce corporate governance.

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Latterly, ¡§corporate governance¡¨ has become an important idea all over the world. There are many companies around the world went bankrupt. Those are often because that their directors or CEOs did not manage the company for the profit of their shareholders, but for their self. In order to make their benefits, the directors and CEOs even did many things illegally to harm the interest of the company. In order to stop this trend, the administration all over the world attempts to reform their corporate governance system. Although the corporate governance system of Taiwan has also been improved during the recent years, it is hard to say that our system is in the perfect condition. Hence, the purpose of this thesis is to try to analyze the corporate governance system of Taiwan, and to give some suggestion for the governance system in the future. There are six chapters in this thesis. Next segment is the introduction of these chapters. Chapter 1: Descript the incentive, purpose, range and structure of this thesis. Chapter 2: Discuss the agency theory, introduce the idea of ¡§corporate governance¡¨, and realize the capital structure of the company in Taiwan. Chapter 3, 4, 5: Analyze the self-governance mechanisms in Taiwan. The self-governance mechanisms include shareholder, board and supervisory board. At the end of each chapter, the thesis will give some suggestion about our corporate governance in the future. Chapter 6: Summarize all the viewpoints and suggestion in this thesis.

This paper tests the relationship between ownership/leadership structures and stock returns for firms listed in Taiwan. A ¡§Governance Index¡¨ is built based on four different aspects of the company¡¦s governance structure: 1.) CEO duality, 2.) Size of the board of directors, 3.) Managements¡¦ shareholdings and 4.) Block shareholders¡¦ holding. This index is used as a proxy measure of the effectiveness of corporate governance mechanism. I show that firms identified by the governance index as under sounding governance outperform those under poor governance. The results indicate that the corporate governance index built in this study is a valid measure in evaluating the effectiveness of corporate governance of firms in Taiwan. I demonstrate one additional application of the governance index constructed in this dissertation by showing that firms (identified by the governance index) with strong corporate governance mechanism effectively constrain the propensity of managers to engage in earnings management and improve the quality of reported earnings. Corporate governance is an effective monitoring device of the quality of financial reporting. Firms with poor governance structure are more likely to avoid reporting small losses by reporting small positive earnings. Furthermore, the magnitude of abnormal accruals is significantly related to governance level. Firms with weak corporate governance structures are more likely to use discretionary accruals to raise reported earnings.

Earnings management can be used to respond to a variable economics environment to improve firm performance under efficient contracting perspective but earnings management can also be abused to hurt a firm¡¦s performance under opportunistic behavioral perspective. Investors, therefore, have difficulty to understand and know about the purpose of earnings management, especially for firms in Taiwan that are very likely to engage in earnings management due to poor governance. Although numerous literatures have shed light on managers¡¦ incentives on earnings management and the effects of earnings management on firm performance, little attention has been devoted to disentangle the relation among corporate governance, earnings management and firm performance. The purpose of this dissertation is to unravel manager¡¦s intension on earnings management and to clarify whether proper governance can alleviate the abuse of earnings management and, therefore, enhance firm performance. Without distilling the effect of corporate governance on earnings management, the empirical results indicate that there is an inverse relation between earnings management and firm performance, implying that managers are more likely to exploit the latitude of earnings management to mislead investors and gain opportunistic profit. This dissertation further examines the relation between earnings management and the features of corporate governance including ownership structure and board characteristics. These results show that stronger corporate governance can effectively reduce the abuse of earnings management. Furthermore, this dissertation provides the evidence that the relation between earnings management and firm performance is improved when the use of earnings management is monitored under proper governance.

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Abstract Chief executive officer (CEO) compensation is a potent instrument through which people and investors can improve their understanding of organization substance and symbol. Good compensation package can not only improve the performance of worker but also lift employees¡¦ commitment to work. However, we are not so sure about the positive association between CEO compensation and firm performance because of the existing of ¡§agency theory¡¨. The degrees of alignment of interests with those of the agents in the firm who control the major decisions in the firm are also different. This gives rise to potential conflicts among the stakeholders, and these incentive conflicts have now come to know as ¡§agency (principal-agent) problem¡¨. Being desirous of the problem, this thesis reviews and integrates the literature on CEO compensation, focusing on both determinants and consequences of this complex, often controversial phenomenon. Thus, a model of the determinants of CEO compensation is presented and investigated. Based on a sample of 422 from Taiwan listed companies, I investigated the data both from Taiwan Economic Journal (TEJ) and the annual report of each listed company to combine in order to examine the compensation model. The definition of CEO in this thesis is one of the following three identities: chairmen of the board, general managers, and people who serve as both positions, that is, CEO duality. Hypotheses are tested and the study finds that CEO compensation has complex links to several factors: firm sizes, performance, stock return, and board stock ownership. The main factors for deciding CEO compensation are economic determinants and the only significant board control variable is board stock ownership. Contrary to some foreign literature, the index of duality is not significant at all since that people who serve as both chairmen and general manager obtain below average compensation level than others. In summary, the thesis provides the different results of a matrix of different identities and industries, and hopes to have some contribution to following research.

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Abstract Since the Asian financial crisis in 1997, several researches for the East Asian have found that concentration of ownership higher than other areas and weak corporate governance have been important reasons of financing crisis. Therefore, the study adopts the method developed by La Porta, Lopez-de-Silanes and Shleifer (1999), which traces the chain of ownership to find who has the most voting rights, identifies their ultimate control patterns, finds the controlling shareholders of firm, and then calculates each ultimate owner¡¦s control rights and cash flow rights. We also try to find the relationship between those ways of controlling shareholders to the voting rights, cash flow rights, and the degree of control rights deviating from cash flow rights. In Addition, we regress to the Proxy Q on controlling shareholders¡¦ control rights deviating from cash flow rights, then examine the evidence on expropriation of minority shareholders. This paper investigates whether the board construction on corporate governance mechanism effectively discharge its monitoring function and mitigate central agency problem. The research data are collected from the publications of those companies that stocks are openly traded on the Taiwan Stock Market between 2000 and 2003 April. There are 183 validated observations which are obtained. Empirical result suggests¡G 1. The high concentration of ownership is more common in Taiwan publicly listed companies and those firms are typically controlled by families. 2. The controlling shareholders typically have power over firms significantly in excess of their cash flow rights because they through the use of pyramids, cross-holdings, paper company and participation in management. And the condition of family control company is the worst. 3. The more the controlling shareholders¡¦ cash flow rights, the better performance of the firm. 4. For Taiwan publicly listed companies, the corporate governance mechanism could not effectively discharge its monitoring function and mitigate central agency problem.