TITLE:
The Impact of Separation between Control Rights and Earnings Distribution Rights and the Mandatory Establishment of the Independent Director Mechanism on Investment in Intangible Assets
AUTHORS:
Ya-Hui Luo, Jen-Ten Liu, Chia-Chi Lee
KEYWORDS:
Separation between Control Rights and Earnings Distribution Rights, Agency Theory, Efficient Contract Theory, Independent Director, Intangible Asset
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.14 No.2,
March
7,
2024
ABSTRACT: In this
study, the impact of the degree of separation between control rights and
earnings distribution rights on the R&D expenditures, book intangible
assets and advertising expenses after the mandatory establishment of the
independent director mechanism in listed/OTC companies of Taiwan was explored.
Most controlling shareholders increase their shares by means of
cross-shareholding or pyramid structure, and participate in the management of
the corporate, which makes it difficult for minority shareholders to impact the
formulation of corporate policies. Therefore, according to the agency theory,
the higher the degree of separation between control rights and earnings
distribution rights is, the less the intangible assets the corporate will
invest. However, according to the efficient contract theory, owners of
corporates may voluntarily hire professional managers and invest in the costs
of self-restraint and supervision. The empirical results of this study support
the efficient contract theory, that is, the degree of separation between
control rights and earnings distribution rights and the number of independent
directors have a positive impact on R&D expenditures, book intangible
assets and advertising expenses. In addition, the number of independent
directors may strengthen the positive impact of the degree of separation
between control rights and earnings distribution rights on R&D
expenditures, book intangible assets and advertising expenses.