Does the Appointment of Independent Directors Drive Multiple Effects?

We analyze the announcement price behavior of independent director appointments stemming from monitoring, signaling, advising effects and moderating effects of controlling shareholders. Based upon appointments samples made by firms listed on the Taiwan Stock Exchange, we find that the cumulative abnormal returns (CARs) of the announcement of voluntary independent director appointments are significantly higher than those of the announcement of mandatory appointments. This empirical result indicates that the market may well recognize that voluntary appointments of independent directors could represent a signaling vehicle. Our findings also show that the monitoring and advising effects of independent directors has failed under the presence of controlling shareholders.