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Research on Taiwan Public-listed Companies Parent Subsidiary Cross-shareholding & Stock Repurchase System

Author: LiuJianZhong
Tutor: ShiBenRen
School: Jinan University
Course: Accounting
Keywords: Cross-Shareholding Treasury Stock Corporate Governance
CLC: F832.5
Type: Master's thesis
Year: 2005
Downloads: 338
Quote: 2
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Abstract

Parent subsidiary cross-shareholding companies was the starting point of the implementation of the Taiwanese Treasury stock repurchases system. Due to a lack of corporate governance and other external variables, i.e. the influence of the 1997 Asia financial crisis, all of the weaknesses started to unravel within a short span of time, hence creating uproar in the Taiwanese Stock Market.This thesis researches the formation of the over-inflated stocks, as well as providing factual examples to explain the operational methods, procedures and outcomes for Parent-subsidiary cross-shareholding companies. The unique legislation in the Taiwanese environment has indirectly assisted in creating the over-inflated incidents, thus this thesis attempts to analyze the formation process of the Taiwanese legislation and other related governmental departments’ legal system, which eventually came undone in a chain of events during the Asian financial crisis. Due to differences between the Eastern and Western cultures then resulting in differing practices of corporate governance, had the relevant governing authorities installed preventive preparatory systems, such financial impacts could thus have been minimized.This thesis hopes to analyze and compare between the past Parent-subsidiary cross-shareholding companies’ then-treasury stock system and the current operating system. However, residual problems remain from the previous era. At the same time, there is a lack of governance in the form such as an official watchdog or association to monitor these companies, which provided the opportunity to manipulate their financial figures. These irregularities, coupled with the 1997 Asian financial crisis gave birth to the governing system for Treasury stock repurchases. It is revealed that, due to the differential between western and eastern culture, in addition to other research results of Taiwanese Parent-subsidiary cross-shareholding and Treasury stock systems has proven that it was then an appropriate point of time for the implementation of Treasury stock system; and as the new system continues to evolve in its environment despite the mentioned problems, there remains room for improvement in the current setup.For suggestion, it is that the internal and external corporate governance of companies be strengthened, as well as revising the Taiwanese companies, securities’ act legislation, specifically to the regulation on cross shareholding stocks and limiting the authorities of the cross-shareholding stocks shareholders.(1) Company’s corporate governance internal mechanisms: A complete internal corporate governance mechanism, increasing the authority powers of the Audit department as well as its independence from other units. There should not be conflicts of interest during theselection of the Board of directors and other positions such as independent observer. During the process of public listing, there should be a separate independent Board to evaluate the feasibility of the act. The main purpose of all of the above is to prevent the exploitation of the rights of the minority shareholders.(2) Company’s corporate governance external mechanisms: Establishing a presence in the market, abiding with the relevant governing regulations and associations, avoiding any possible management conflicts of interests, as well as agency problems.A further suggestion would be to be adopting the German legislation of fully defining each entity’s relationship amongst each other, as well as totally banning the re-purchase of subsidiaries’ stocks from the parent companies. As for the already purchased Parent stock by the Subsidiaries Company and vice-versa within a restricted time period, these stocks are not entitled to any shareholders’ voting, dividend sharing etc. rights prior to its purchase.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial market
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