【TEJ Dictionary】What is the corporate Governance Evaluation System? The influence on companies

TEJ Dictionary

What is the Corporate Governance Evaluation System?

In Dec. 2013, The Financial Supervisory Commission(FSC) announced the “corporate governance enhancement blueprint” for 5 years. The FSC considers the corporate governance evaluation system an important working point to make corporate governance receive more attention.

TWSE and TPEx entrust security & futures institute to establish the corporate governance evaluation system, which is constructed in 4 dimensions, namely “Protecting Shareholder Rights and Interests and Treating Shareholders Equitably”, “Enhancing Board Composition and Operation”, “Increasing Information Transparency”, and “Promoting Sustainable Development”.

The influence on companies

Some studies indicated that there was a positive relationship between corporate governance and stock returns & performance. (Shiue et al. 2018; Shiue, Chiou, & Chiu. 2017)

Therefore, we can say that companies with high ratings in the corporate governance evaluation system usually have better operation and financial performance. According to the 2021 result, there are 7 class intervals, namely 5%, 6%-20%, 21%-35%, 36%-50%, 51%-65%, 66%-80%, and 81%-100%. And, there are 46 companies in the top 5% interval.

Companies in the top 5% (Source: Security & futures institute)

Location of Database

We can inquire about the result of the corporate governance evaluation system each year. The intervals are slightly different in the corporate governance evaluation system every year, so TEJ develop 7 intervals from A+ to D- which is easy to make a comparison between years.

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