AAA Spark Meeting of the Regions

Stewardship Principles, Institutional Investors, and Financial Performance: Evidence from Taiwan

• In Event: Corporate Culture and Stewardship

Abstract

This study investigates the relationship between institutional investors signing the Taiwan Stewardship Principles (TSPs) and the investee’s financial performance. We find that companies with institutional investor signatories of the TSPs are positively associated with future financial performance, suggesting that institutional investors who have committed to responsible investing implement the monitoring and thus improve the performance of the investees. This study further investigates whether the corporate governance of investee companies makes a difference in the association. The results show that the companies with good corporate governance experience a relatively small increase in return than companies with poor corporate governance, indicating the substitute effect between the TSPs and the conventional governance mechanisms. This study has the following implications. First, it provides evidence for regulators to review policy promotion. Our findings offer incentives to institutional investors to engage in responsible investing. Finally, investors may refer to our study when they make investment decisions.

Authors

• Wu-Po Paul Liu, National Cheng Kung University

• Mengyu Ma, University of Central Arkansas

• Yun-Chia Hsu, National Cheng Kung University

• Wan-Ci Huang, National Cheng Kung University