Corporate governance, resources, FDI commitment and firm performance: Empirical analyses of Taiwanese high-tech firms

Abstract

Purpose

This study aims to explore the effects of corporate governance structure and resources on foreign direct investment (FDI) commitment and firm performance.

Design/methodology/approach

The data are collected from high-tech firms listed by the Taiwan Stock Exchange. All selected 137 firms have complete FDI and other required data during 2007-2009. The mean values of the variables during the three-year period were used for analysis.

Findings

The results indicate that both chief executive officer (CEO) duality and government shareholding affect a firm’s FDI; and the higher the management shareholding ratio, the lower the return on equity. Moreover, a large ownership of substantial shareholders can enhance a firm’s performance; and higher institutional ownership can lead to higher firm performance.

Research limitations/implications

This study analyses the limited data from 137 high-tech firms in Taiwan during the three-year period of 2007-2009. Further analyses of other industries, countries and time periods are needed to generalize the conclusions.

Practical implications

A firm with CEO duality should increase the ratio of government holding to mitigate the influence of CEO on FDI decisions. When a firm’s performance is poor, the ratio of managerial holdings should be reduced; conversely, the firm could attract more holdings from domestic securities and funds to improve performance.

Originality/value

This study provides guidelines for shareholders to analyze governance structure and formulate their investment strategies. Corporate policymakers may use these as the principles for designing a corporate governance structure that could engender optimal firm performance.

Citation

Tsai, M.-T. and Tung, W.-H. (2014), "Corporate governance, resources, FDI commitment and firm performance: Empirical analyses of Taiwanese high-tech firms", Chinese Management Studies, Vol. 8 No. 3, pp. 313-332. https://doi.org/10.1108/CMS-08-2012-0118