OWNERSHIP STRUCTURE AND PROXY CONTEST WITHOUT PROXY TRADING: EVIDENCE FROM TAIWAN SECURITIES MARKETS

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Lanfeng Kao, Anlin Chen

DOI:10.22495/cocv2i4p8

Abstract

This paper discusses how proxy fights affect the incumbent managers’ attitude toward the shareholders. In Taiwan, the proxy rules Amendments in 1996 prohibit the proxy fighters to purchase proxy rights from shareholders. We argue that the prohibition of proxy trading favors the incumbents to gain control over the firms. Since the proxy rules favor the incumbent managers, incumbent managers do not have to keep a high ownership to gain control leading to severe agency problems between incumbent managers and outside shareholders. With the case of stopping proxy trading in Taiwan, we indicate that to order to mitigate the managers’ unethical behaviors toward shareholders under the separation of ownership and control, proxy rules should be unbiased toward both the incumbents and raiders.

Keywords: Agency Cost, Business Ethics, Firm Performance, Proxy Fights, Separation of Ownership and Control, Takeover

How to cite this paper: Kao, L., & Chen, A. (2005). Ownership structure and proxy contest without proxy trading: Evidence from Taiwan securities markets. Corporate Ownership & Control, 2(4), 86-92. http://doi.org/10.22495/cocv2i4p8