||The Internal and External Monitoring Effect of Corporate Governance– An Efficiency of Cash Holdings Perspective
||Doctoral Program, Department of Management Sciences
Difference in difference method
在外部監督方面，Huang and Zhang(2012)的研究發現，在機構投資人為主的美國股票市場，加強資訊揭露，可以降低公司的代理成本，本研究進一步探討以散戶投資人為主的台灣股票市場，資訊揭露是否同樣可發揮資本市場監督與紀律的功能。我們運用Huang and Zhang(2012)的實證模型，驗證在不同的資訊揭露水準下，公司持有現金資產的價值是否存在差異。實證結果顯示，資訊揭露品質較佳的公司，相較於資訊揭露品質較差的公司，其現金資產的價值並無顯著差異， 此與Huang and Zhang(2012) 在以機構投資人為主的市場研究結果並不一致。本研究進一步以機構投資人交易比重， 將樣本區分為機構投資人成交比重高、低兩群，驗證機構投資人及散戶投資人的監督效果是否有所差異，結果顯示，在機構投資人成交比重相對較高的這一組中，資訊揭露程度的高低，確實會影響公司現金持有的價值，兩者呈現顯著正向的關係;而法人成交比重較低的一組，其結果則為無顯著相關。此說明市場提供的外部監督機制，主要由機構投資人進行，因此資訊揭露對公司治理的效果，在以機構投資者為主的證券市場中較為有效。
||This study attempted to explore the effects of internal and external supervision of corporate governance from the perspective of a company’s cash holdings efficiency. Internal supervision was examined from the perspective of reducing agency costs, in order to investigate whether the use efficiency of company cash holdings was improved due to the establishment of an auditing committee in which corporate governance was fine-tuned. Companies that established an auditing committee between 2007 and 2010 were included as samples in this study and the difference-in-difference (DID) method was used to explore the supervision effect of auditing committees. Results of empirical analyses showed that generally speaking, within the sample of over-the-counter (OTC) market-listed companies, the expected supervision effect from the establishment of auditing committees was not reflected in the value of companies’ cash holdings. Further empirical analyses were performed after differentiating the sampled companies between Taiwan stock exchange (TWSE)-listed companies and OTC-listed companies, based on the respective stock exchange markets. The empirical results of TWSE-listed companies demonstrated that the use efficiency of company cash holdings increased owing to the establishment of auditing committees, whereas that among OTC-listed companies dropped due to the establishment of auditing committees. These results revealed the differences between the market structures of TWSE- and OTC-listed companies, also indicating that the establishment of auditing committees produced different interference effects on the use efficiency of cash holdings.
Huang and Zhang (2012) provide evidence that enhanced information disclosure helps reduce the agency cost from the U.S.A. stock market that is dominated by institutional investors. This study attempts to explore if the supervision and disciplinary effect of capital market still exists in Taiwan’s stock market that is dominated by retail investors. We use the empirical model of Huang and Zhang(2012) to verify whether cash holdings are valued differently depending on information disclosure levels. The empirical results show that the cash holdings of companies with better disclosure quality are not valued significantly higher than those of companies with poorer disclosure quality. This finding is inconsistent with the evidence of Huang and Zhang (2012) from an institutional investor dominated stock market. This study further divides the sample into two sub-samples, one consisting of firms with high institutional trading percentage and the other consisting of firms with low institutional trading percentage, to examine the monitoring effect of institutional and retail investors. Results indicate that for firms with a higher institutional trading percentage, the relation between the product of ratio of change in cash and disclosure level and abnormal returns is significantly positive; for firms with a lower institutional trading percentage, the relation is not significant. This explains the external monitoring in the capital market is mainly provided by institutional investors, and the effect of enhanced disclosure on corporate governance is more pronounced in the stock market dominated by institutional investors.
||Table of Contents
Chapter 1 Introduction 1
1.1 Research Background and Motivation 1
1.2 Research Purpose and Contribution 3
1.3 Process and Framework of the Dissertation 4
Chapter 2 The Monitoring Effect of Information Disclosure: Institutional and Retail Investors 6
2.1. Introduction 6
2.2. Literature Review and Hypotheses Development 8
2.2.1 Information Disclosure and Agency Costs 9
2.2.2 The External Monitoring Role of Institutional Investors 10
2.3 Research Design 12
2.3.1 Sample Selection and Period 12
2.3.2 Empirical Model and Variable Definition 13
2.4 Empirical Results 17
2.4.1 Descriptive Statistics 17
2.4.2 Data Analysis 17
2.5 Conclusions and Suggestions 24
Chapter 3 Can the Audit Committee Provide Better Oversight of Listed Companies? –An Efficiency of Cash Holdings Perspective 27
3.1 Introduction 27
3.2 Literature Review and Hypotheses Development 29
3.2.1 The Benefits of Setting Up an Audit Committee 29
3.2.2 Theories and Literature on Cash Holdings 30
3.2.3 Hypotheses 31
3.3 Method 36
3.3.1 Sample Composition 36
3.3.2 Definition of Variables 38
3.3.3 Empirical Model 40
3.4 Empirical Results 42
3.4.1 Descriptive Statistics 42
3.4.2 Correlation Analysis 42
3.4.3 Regression Analysis 43
3.5 Conclusions and Suggestions 50
Chapter 4 Concluding Remarks 53
4.1 Major Findings 53
4.2 Arguments Related to the Findings 54
4.3 Implications for Practitioners 55
4.4 Limitations and Further Research 56
Figure 1.1: Flow chart of research 5
Table 2.1: Variable definitions 18
Table 2.2: Descriptive statistics (N=1,367) 19
Table 2.3: Determinants of disclosure activity (N=1,367) 20
Table 2.4: Effect of disclosure on the value of cash holdings (N=1,367) 21
Table 2.5: Determinants of disclosure activity 22
Table 2.6: Effect of disclosure on the value of cash holdings 24
Table 3.1: Sample composition 37
Table 3.2: Definition of variables 39
Table 3.3: Descriptive statistics 44
Table 3.4: Correlation coefficient matrix 46
Table 3.5: The effect of setting up an audit committee on the values of cash holdings 49
Table 3.6: The effect of setting up an audit committee after pairing (by market) 50
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