Corporate Governance is an important topic that has been given a great deal of attention the last decade and the attention has increased even more with the financial crisis of 2007-2009. The severe financial and economic crisis has worsened the relationship between shareholders and corporations, including banks, as well as between the executive management and the board of directors. There is a need to rebuild the trust between these actors and Corporate Governance is considered to be a helpful tool in order to achieve this. A mean that is used within Corporate Governance to protect shareholders in the financial market is the use of independent directors as a monitoring device for the executive management. Independent directors are considered to play an important role on boards and are preventing inside directors from abusing their power in hazardous ways. The efficiency of independent directors has however shown to differ between industries. The banking industry in particular stands out in comparison to non-financial firms. It is vital that independent directors are provided with the right expertise that is needed to fundamentally understand the complex industry of banks, and there is a risk that these directors lack this kind of knowledge which makes their presence inefficient. The aim of this thesis is to investigate whether there have been any changes in the number of independent board members in four Swedish banks within the time period of 2001-2010. The banks that are included in this study are Handelsbanken, Nordea, SEB and Swedbank. Variables that are covered in the study are, except for number of independent board members in respect to the bank and major shareholders, the number of executives on the boards, the gender distribution, average age and average tenure of the independent board members. The result shows that there has been an increase in the number of independent board members within the investigated time period. The banks are complying with guidelines concerning board independence that are included in various recommendations provided by both the European Commission as well as the Swedish Corporate Governance Board.

This study examines whether board independence is an effective corporate governance mechanism in reducing earnings management in China, a country with significantly different institutional and legal characteristics from the Anglo-Saxon countries. I investigate: (i) whether voluntary adoption of board independence prior to the China Regulatory Securities Commission (CSRC) regulation on board independence is associated with lower earnings management; and (ii) the extent to which the CSRC regulation is effective in achieving the aim of inhibiting earnings management. I employ two stage least squares techniques to control for potential simultaneity problems between earnings management and board independence and documents that failing to control for such problems will lead to biased and inconsistent estimates. Using three different measures of earnings management, I show that firms that voluntarily move towards board independence (i) have lower levels of discretionary accruals; (ii) employ less severe income smoothing strategies; and (iii) are less likely to manage return on equity to meet regulatory thresholds. In contrast, firms adopting board independence following the CSRC regulation in 2002 do not experience any changes in the levels of earnings management before and after the regulation. These results suggest that regulation alone is not a sufficient solution to motivate effective independent boards.

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This thesis examines the development of the independent director system in China. The newly introduced independent director system is viewed as a revolutionary change to the Chinese corporate governance development. After analyzing the barriers in independent directors’ practice in China, this thesis gives some suggestions on how to improve the independent director system in China. Finally the thesis concludes that the independent director system will certainly become effective in China, but only if China’s policy makers can eventually solve the existing problems.

In Essay 1, we examine the departure of independent directors among 525 Taiwanese publicly listed firms with independent directors on the board between 2002 and 2006. We find that the accounting restatements is positively associated with the number (and the rate) of departures in the firm. This result implies that deteriorating financial reporting quality is related to the departures, which is consistent with Srinivasan's (2005) finding among the U.S. firms. We also find the number (and the rate) of departures is positively associated with shares owned by controlling families. Our findings support the independent directors’ role for intense monitoring based on agency theory. The results also support Anderson and Reeb’s (2004) result based opinion that that independent directors can protect minority shareholders’ interest by hindering dominant or family shareholders’ opportunistic or expropriation behaviors. In essay 2, we examine if there are significant associations between firm performance and (1) directors’ shareholdings, (2) directors’ family shareholdings, and (3) independent directors’ career affiliations in 2,164 Taiwanese publicly listed firms between 2002 and 2006. After addressing for possible endogeneity and controlling for firm specific variables, we find a positive association between CEO’s shareholding and firm performance. Consistent with agency theory and incentive effect, this result indicates that CEOs have control over firms’ operation and have incentive to maximize firms’ value. Also, we find a negative association between firm performance and non-executive directors’ shareholdings. This result, which is consistent with the entrenchment effect, implies that the possibility of expropriating minority shareholders’ interest may increase with shares owned by non-executive directors. However, we find that the non-executive directors’ family shareholding is positively related to firm performance, which implies that non-executive directors may be motivated by their family members to improve firm value. The results also imply that the majority-minority agency problem (Villalonga and Amit, 2006) can be reduced when director’s family welfare is at stake. In addition, consistent with skill matching theory (Jovanovic, 1979), we find a positive association between independent director’s career affiliation of executive officer and firm performance, which implies that independent directors who are executives are likely to improve firm performance.

Nowadays financial fraud scheme become more and more prevalent in public-traded companies in western and oriental countries. Many finance-related literatures realize and put stress on the importance of corporate governance. In this study, we would like to explore the relationship between audit committee and CEO compensation and equity incentives. We use multiple regression as methodology, take the public companies in technological field in Taiwan as sample from 2005 to 2010. We discover that, there is a positive relationship between the ratio of the number of independent directors divided by the audit committee members and the CEO compensation; there is no significant relationship between the ratio of the number of independent directors also serve as CEO directors in other firms divided by the audit committee members and the CEO compensation; there is a negative relationship between the ratio of the number of financial-accounting expertise divided by the audit committee members and the CEO compensation. And with regard to the equity incentives, there is no significant relationship between the ratio of the number of independent directors divided by the audit committee members, the ratio of the number of independent directors also serve as CEO directors in other firms divided by the audit committee members, the ratio of the number of financial-accounting expertise divided by the audit committee members and equity incentives.

Abstract The aim of a company¡¦s legal system is to harmonize the conflict interests among stakeholders for pursuing the company¡¦s maximum value. However, in the recent years, we have seen that a lot of enterprises happened abuses one after another. Securities authority and investors therefore deem the corporate governance necessary to enhance. Facing the insufficiency of corporate governance, Taiwan added the Articles 14-2, 14-3, 14-4, 14-5 of Securities and Exchange Act when the Act was amended in January 2006. These added articles introduced the system of independent directors, but they caused the disputes in the domestic industries and academic circles. This article is trying to find the ways of improvement for each problem in order to promote the efficiency and competence of independent directors, as well as induces the following major conclusions and suggestions. 1. Conclusions (1) The topic of independent directors is still a difficult issue. (2) It has to meet six elements for promoting the efficiency and competence of independent directors. They are: a. independency; b. professional and time input; c. proper incentive of monitor and control; d. freely acquire the needed data and information for monitoring and controlling; e. economic cost of monitor and control, or efficient monitor and control; f. adequate limits of authority for controlling and balancing. (3) Only legal system and honest and trusted operation are working at the same time, can the efficacy of corporate governance be brought into fully play. (4) The fulfillment of corporate governance needs the implement of all members in the company. 2. Suggestions (1) The facet of legal regulations: a. amend the Article 27 of Company Law; b. independent directors occupies 50% of the number of all board directors; c. the shareholders with holding rate less than 1% in the company are elected as independent directors. (2) The facet of systems: a. whether the company sets up the independent directors or not is the company¡¦s free selection; b. the solutions or opinions of the independent directors for the items on the agenda should be bulletined on the Market Observation Post System and the company¡¦s website; c. appropriate rewards; d. compelling standards for setting up other functional committees.

Cette thèse de doctorat comprend trois essais portant sur plusieurs sujets dans le domaine de la finance d'entreprise empirique. L'essai 1 étudie l'avantage informationnel des administrateurs indépendants ayant une expertise de l'industrie par rapport aux administrateurs indépendants sans cette expertise. Pour le faire, je regarde les bénéfices des transactions dites « d'initiés » réalisés par des administrateurs indépendants. Je trouve que les administrateurs indépendants possédant une expertise sectorielle obtiennent des bénéfices significativement plus élevés que les administrateurs indépendants sans ladite expertise. De plus, une augmentation de la proportion d'administrateurs indépendants possédant une expertise sectorielle pertinente au sein du conseil est associée à une meilleure performance de l'alliance, à une plus grande probabilité d'accomplissement des opérations de fusions et acquisitions et à une sensibilité moindre des investissements faites par l’entreprise aux prix de marché. Les résultats dans son ensemble suggèrent que les administrateurs experts de l'industrie ont une connaissance supérieure de l'entreprise et pourraient améliorer l'efficacité du conseil d’administration dans l'exercice de ses fonctions de surveillance et de conseil. L'essai 2 étudie l'effet préjudiciable de l'activité de vente à découvert sur les relations entre clients et fournisseurs. Nous montrons que le montant de ventes à découvert des actions d'un fournisseur est positivement associé à une probabilité plus élevée qu'un client important du fournisseur mette fin à la relation commerciale entre les deux. Une telle interruption peut être partiellement prévenue par la présence de détenteurs de « blocs » d’actions dans l'entreprise du fournisseur, particulièrement si ces détenteurs ont une orientation à long terme. Nos résultats sont conformes à l'hypothèse selon laquelle les vendeurs à découvert peuvent perturber les relations d'une entreprise avec des contreparties commerciales grâce à l'effet dit de « rétroaction », c’est-à-dire, le fait que les prix de marché affectent les décisions de l’entreprise. Par contre la présence de détenteurs de « blocs » constitue un mécanisme efficace pour contrer cette perturbation. L'essai 3 examine les raisons possibles du taux croissant d'annonces d'offres d’acquisition « groupées », dans lequel le management de l’acquéreur annonce une acquisition imminente le jour même où l’acquéreur déclare ses résultats trimestriels au marché. Cette pratique semble étrange étant donné que les offres groupées présentent des rendements d'annonce des acquéreurs nettement inférieurs, quel que soit le statut de la cible. Nos résultats pointent vers l'hypothèse de « révélation stratégique d’information » comme la raison la plus probable pour laquelle les entreprises choisissent de regrouper les annonces d'acquisition et les annonces de bénéfices. Ces acquéreurs, confrontés à des faibles bénéfices, dirigés par des PDG récemment nommés, et dans une situation où les analystes les contestent et où l'incertitude est grande, utilisent les annonces groupées comme un outil pour influencer la réception du marché sur leur performance. / This doctoral thesis includes three essays investigating several topics in the area of empirical corporate finance. Essay 1 studies the informational advantage of independent directors with industry expertise over independent directors without such expertise. To do so, I look at insider trading returns earned by independent directors. I find that independent directors with industry expertise earn significantly higher insider trading returns than do independent directors without such expertise. Moreover, an increase in the proportion of independent directors with relevant industry expertise on the board is associated with better alliance performance, a higher probability of M&A deal completion, and a lower investment-to-price sensitivity. Overall, the results suggest that industry expert directors have superior knowledge about the firm and could enhance board effectiveness in performing both monitoring and advisory roles. Essay 2 studies the detrimental effect of short selling activity on product market relationships. We show that higher supplier’s short interest is associated with a higher likelihood that a major client of the supplier terminates an existing relationship. Such interruption can be partially prevented by the presence of long-term blockholders in the supplier firm. Our results are consistent with the hypothesis that short sellers can disrupt a firm’s relationships with business counterparties through the feedback effect, but informed block ownership serves as an effective mechanism to counteract this disruption. Essay 3 investigates possible explanations for the increasing rate of “bundled” bid announcements, in which managers of the bidder announce an impending acquisition on the same day that the bidder reports its quarterly earnings to the market. This practice seems puzzling given that bundled bids exhibit significantly lower bidder announcement returns regardless of the target status. Our results point towards the strategic disclosure hypothesis as the most likely reason why firms choose to bundle acquisition and earnings announcements. Confronted with low earnings news, led by recently-nominated CEOs, in a situation in which they are challenged by analysts and uncertainty is high, bidders use bundled announcements as a tool to influence the market’s reception to the earnings.

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