A Study Of Corporation Governance Model And Key Successful Factors Of Financial Holding Company In Taiwan

Significant changes could be observed in the international finance environment at the end of the twentieth century, in which the most significant trend was the vanishing boundaries between banks, securities, and insurance, and the emerging of cross-industrial cooperation and operation, which later on will developing into conglomerate. Such a change was reflected on the changes of laws in different countries, for example: Japan in 1997 lifted restrictions on the establishment of whalte holding companies, the U.S. in 1999 passed the Financial Services Modernization Act, and Korea in 2000 passed its Financial Holding Company Act. In response to this international finance trend, Taiwan in 2001 also passed its Financial Holding Company Act. All of a sudden, the wave of financial institution integrations is the new hottest international finance issue. However, new financial supervision problems were also derived from this change as well. Mayes, Halme, and Liuksila (2001 ) pointed out that in a financial environment that is growing more and more complex, one development of new financial supervision systems is the gradual transition from a conventional government-dominated system into a market-oriented system. The functions of a market-oriented system are supported by a robust market environment, good corporate governance, and accurate information disclosure; good corporate governance is at the core of the whole mechanism. Seeing that the finance industry is an important financial intermediary in the overall economic environment, effects of corporate governance in financial holding companies not only concern the rights and benefits of its investors, but also plays a critical role in maintaining stability of financial order and development of the economy.Based on the research background and motivation described above, this study integrates domestic and foreign corporate governance theories, practice evaluation systems, and laws of financial supervision, believing that effective corporate governance within financial holding companies should return to its core - functions of the board of directors. This study proposes a prospective corporate governance system on this theoretical basis, the system includes three functions of the board of directors and ten professional committee mechanisms, and further utilizes Analytic Network Process (ANP ) to find key factors for the system's success and the priority of these factors. According to empirical results, the top ten factors that influence the success of corporate governance in a company in the form of professional committees are as follows: Nomination Committee 25% ), Remuneration Committee( 21% ), Shareholder Equity Committee( 19% ), Executive Committee( 9% ), Audit Committee( 7%), Strategy Audit Committee (7%) , Information Disclosure Committee(6% ), Risk Management and Internal Control Committee( 4%), Social Responsibility Committee (2%) , and Takeover Committee (1%) .Concretely speaking, this study compared with previous studies has been innovative and made contributions in the following three aspects:(1) Research subject: In accordance with the new patterns of financial holding companies, this study proposes a corporate governance system that integrates theory, practice, and supervision laws. The system takes on many important aspects and factors that current corporate governance evaluation systems have left out, and in this regard this study may serve as a prototype and sample for the evaluation of corporate governance in these new forms of financial holding companies. (2) Research method: Compared with literature on corporate governance, the corporate governance system constructed by this study is not just an arborescent hierarchical structure, but also a network system architecture. This network structure embodies the cross-correlation between different aspects and factors of corporate governance, and can help the academic world and practice field to more clearly see the context between aspects and factors of corporate governance. ( 3 ) Empirical results: This study utilizes ANP, combines the opinions of specialists, and arrives at the weights for each aspect and factor within the system, allowing us to understand the key factors for success of corporate governance in Taiwan's financial holding companies. The weight of each aspect and factor found after considering the context between different aspects and factors within the system, can be used as a basis for adding weight to different items of corporate governance evaluation systems.