The Relationship between Financial Crises and Corporate Governance Factors —Examples of Long Term Investments by HighTech Conglomerate
Dr. Keh-Luh Wang
Dr. Chi Chiang
|關鍵字:||財務震撼;關係企業;earnings surprise;insider trading|
ABSTRACT In the past four to five years, due to saturated market conditions and over investment in Taiwan's high technology sectors, the phenomenon of too much supply versus demand took place. This scenario exists because many Conglomerate Management Executives invest in the high tech market they are not familiar with tying up of operating capitals. Or these Executives use highly financial leverage to set up Conglomerate, which become over invested. They also attempt to maintain members’ stock price, moving the capital for other financial purposes. Even worse, they are partaking insider trading or accounting fraud. This results in the difficulty of maintaining appropriate operating capital, which usually results in filing bankruptcy. This mismanagement of operating worsens Taiwan's economy and investment environment and lowers Taiwan's international competitiveness. This research project uses one of the conglomerates as the case study to find out the long-term investment related their members. With the use company financial data, we systematically reveal the elements causing financial crises due to the mismanagement of long-term investment. The elements include capital size, and if the management controlled by the same conglomerate management group or not, ownership, and investment within this conglomerate. Also important management goals, size of Board and numbers of Board members are treated as alerts. This study selects 31 members of one high tech conglomerate (23 of them are normal members, 8 of which are with crises) as the case study. Not only we use ownership, restructuring cost, and biding as the alert elements, but also use logistic regression analysis to set up the alert model. The results show: 1.The normal members' forecast rate is 95.7%, the members' with crises is 100%, and within all group forecast rate is 96.8%. 2.The numbers of Board Members have a positive correlation with the financial crises. The more consortium controls the members, the higher the chance to manipulate the members. 3.The same CEO or Chairman of the Conglomerate has a negative correlation with the corporation financial crises.