Abstract
While the importance of corporate governance has been broadly acknowledged in global financial markets and academic research, how to devise a practical evaluation system is relatively unexplored. This paper attempts to refine the Corporate Governance Evaluation System (CGES), constructed by the Taiwan Stock Exchange (TWSE) since 2014. The current CGES has several debatable issues in its complicated design (e.g., it comprises over 80 indicators in different types). To resolve those issues, this study invited ten senior domain experts (including several CEOs of financial holding companies) to retrieve 13 essential criteria from the CGES in four dimensions. Additionally, this study integrates several multiple criteria decision-making (MCDM) methods (i.e., decision-making trial and evaluation laboratory (DEMATEL), modified VIKOR, DEMATEL-based analytical network process (DANP)) and the fuzzy evaluation technique to rank the exemplary companies. The final ranking is consistent with the one released from the CGES in 2017. This study conducted additional experiments to ensure the robustness of the findings. The newly devised model not only assists the ranking decisions but also supports a company in discussing the plausible action plans to strengthen corporate governance based on the analytics. These findings enrich the understanding of corporate governance and contribute to gaining business sustainability for financial holding companies.
Highlights
The first extensive survey of corporate governance might be the one conducted by Shleifer and Vishny in 1997 [1]
In the third step, based on the distilled criteria from the 87 indicators from the first step, we propose a hybrid multiple criteria decision-making (MCDM) approach to explore the relative influence of each criterion, and the consensus of the aggregated influence of each criterion within a dimension, from the knowledge of domain experts, can be reached
The limitations of commonly adopted research methods regarding corporate governance are briefly explained in Section 2.3, which leads to the reasons or why the concept of MCDM methodology should be more suitable to devise a system compared with the statistical approach
Summary
The first extensive survey of corporate governance might be the one conducted by Shleifer and Vishny in 1997 [1]. We attempt to distill from the existing 87 (i.e., 85 + 2 EXTRA) indicators, to identify the key factors to forming a concise corporate governance evaluation model This step may simplify the CGES, which will be helpful to support decision makers (DMs) focusing on manageable numbers of indicators (criteria). This study obtained the following outcomes by applying the proposed hybrid model to a group of five financial holding companies in Taiwan: (1) Simplify the complicated and debated CGES model to 13 critical indicators in four dimensions; (2) Explore the interrelations among the included criteria by devising a hybrid MCDM model based on domain experts’ knowledge and their professional judgments; (3) Evaluate the performance of corporate governance of five financial holding companies, and if the ranking outcome (in different experiments ) is consistent with the report of CGES in 2017;.
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