The Relations between the Misconduct of the Family Members of the Directors of the Board and the Performance of the Corporation

On 8 Aug 2012, the prominent Chinese-language Next Magazine revealed a high-profile scandal caused by the son of a director in the board of Yungta Financial Holding. Director Lee's son is suspicious of raping and taking photos of many young models. Yungta announced the resignation of Mr. Lee as director of the Holding. This study investigated the reactions of both investors and consumers to this incidence. Although there is no significant impact to the company in terms of its monthly revenues, there exists significant deterioration in the business directly linked with consumers. Our result is consistent with the research of marketing in which negative publicity of celebrities has negative impact on the endorsing firms and their product. This unique event supports many theories concerning the functions of the board of directors, including resource dependent theory, legitimacy theory and stakeholder theory. It also clarifies the importance of the corporate social responsibility