The Agency Problems, Firm Performance and Monitoring Mechanisms: The Evidence from Collateralised Shares in Taiwan

14 Pages Posted: 14 Jul 2004

See all articles by Lanfeng Kao

Lanfeng Kao

National University of Kaohsiung - Department of Finance

Jeng‐Ren Chiou

National Cheng Kung University

Anlin Chen

National Sun Yat-sen University - Department of Business Management

Abstract

This paper indicates that there is an inverse relationship between collateralised shares and firm performance. We further show that this inverse relationship exists only in conglomerate firms. These findings imply that agency problems resulting from shares used as collateral by boards of directors are more serious in conglomerate firms than in non-conglomerate firms. Moreover, we provide evidence that monitoring by institutional investors, creditors and dividend policy can effectively reduce the agency problems of shares used as collateral and thus can improve firm performance.

Keywords: Agency problem, board of directors, collateralised shares, firm performance, monitoring mechanism

Suggested Citation

Kao, Lanfeng and Chiou, Jeng-Ren and Chen, Anlin, The Agency Problems, Firm Performance and Monitoring Mechanisms: The Evidence from Collateralised Shares in Taiwan. Available at SSRN: https://ssrn.com/abstract=557321

Lanfeng Kao

National University of Kaohsiung - Department of Finance ( email )

700 Kaohsiung University Rd.
Nanzih District
Kaohsiung 803
Taiwan

Jeng-Ren Chiou

National Cheng Kung University

Tainan 701
Taiwan
Taiwan

Anlin Chen (Contact Author)

National Sun Yat-sen University - Department of Business Management ( email )

Kaohsiung 80424
Taiwan
886-7-5252000x4656 (Phone)
886-7-5254698 (Fax)

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