Does Proclamation of Independent Director System Affect Firm Value?

This paper explores the proclamation effects of Establishing Independent Director System in Listed Company on firm value. Utilizing modified event study and matching method, we apply empirical methodologies to test three proposed hypotheses derived from theoretical analysis. Our findings show that the proclamation has significant negative effects on firm value; however, these effects are affected by firm characteristics of corporate governance and asset size. Specifically, firms that are more compliant with the regulations before the proclamation or large firms earn positive abnormal returns while firms that are less compliant or small firms earn significant negative abnormal returns.