Journal of Economics and Management Volume 15, No. 1 February, 2019

Does Corporate Governance Enhance Firm Performance and Reduce Firm Risk? Evidence from Taiwanese Listed Companies

Jo-Yu Wang

Department of Finance, National Formosa University, Taiwan.

Juo-Lien Wang

Department of Accounting, Chaoyang University of Technology, Taiwan.

Hui-Yu Liao

Nexia International Sun Rise CPAs and Company, Taiwan.

Abstract

Corporate governance practices are perceived as ways to improve firm performance. This paper examines whether better corporate governance does indeed enhance firm performance in addition to reducing their risks. Based on Taiwanese listed firms from 2002 to 2016, Tobin's Q, ROE, and EPS were used to measure company performance, and Value at risk (VaR) was the proxy for firm risk. The empirical results show that blockholders, managerial ownership, board ownership, and independent directors have a significant impact on company performance, but also that more shares held by institutional investors and the presence of CEO duality aggravate firm risk. This implies that better corporate governance can simultaneously improve firm performance and reduce firm risk, especially in a crisis period. However, the contribution of corporate governance in risk reduction is not as significant as it is during a crisis.

Keywords：Corporate Governance, Firm Performance, Firm Risk.

JEL Classifications：G30, G39.

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