Ultimate Controller Ownership and Firm Value in Taiwan

Using a panel of 242 Taiwanese listed firms during a ten-year period (1997-2006), this study tests whether there is an optimal ratio of ownership ultimate control that maximizes firm value. This work adopts Tobin's <i>q</i> as the proxy for firm value and finds that cash flow rights less than 27.8 percent and control rights between 32.34 percent and 34.03 percent are an optimal level of ownership ultimate control to maximize firm value. This distribution of financing sources propels the nonlinear relationship uncovered in this study and sheds light on legal aspects of Taiwan's system of ownership structure.