Abstract
The purpose of this study is to set up a new enterprise crisis improvement model for corporate governance based on the hybrid MADM model, which addresses on the main causal factors and amended priorities in order to reduce the occurrence of corporate crises. In this study, we present the use of a new hybrid MADM combined with a DEMATEL technique to construct an influential network relationship map (INRM) and find the influential weights of DANP in criteria from the influential relationship matrix, as well as the modified VIKOR method using influential weights, to evaluate and integrate the criteria performance in the gaps. This study also analyzes how to reduce the gaps to evaluate the decision for improving corporate governance effects based on INRM. This method provides decision-makers with a way to formulate improvement strategies. The results show that the overall average gap of corporate governance is 0.501 (signaling a crisis on the 0 to 1 scale). To remedy this issue, much bigger gaps are needed for improvement in each criterion. The implication is that Taiwan's current financial industry corporate governance system is too weak and needs to be strengthened, reengineered, and transformed.
Issue Section:
Research Papers
References
1.
COSO,
2004
, “Enterprise Risk Management-Integrated Framework
,” http//www.coso.org/ (Last accessed 24 July 2014).2.
Anderson
, R.
and Fraser
, D.
, “Corporate Control, Bank Risk Taking, and the Health of the Banking Industry
,” J. Bank. Finance
, Vol. 24
, No. 8
, 2000
, pp. 1383
–1389
. https://doi.org/10.1016/S0378-4266(99)00088-63.
Fuenzalida
, D.
, Mongrut
, S.
, Arteaga
, J. R.
, and Erausquin
, A.
, “Good Corporate Governance: Does It Pay in Peru?
” J. Bus. Res.
, Vol. 66
, No. 10
, 2013
, pp. 1759
–1770
.4.
Westphal
, J. D.
and Zajac
, E. J.
, “A Behavioral Theory of Corporate Governance: Explicating the Mechanisms of Socially Situated and Socially Constituted Agency
,” Acad. Manage. Ann.
, Vol. 7
, No. 1
, 2013
, pp. 607
–661
. https://doi.org/10.1080/19416520.2013.7836695.
Zahra
, S. A.
, “Public and Corporate Governance and Young Global Entrepreneurial Firms
,” Corp. Govern.: Int. Rev.
, Vol. 22
, No. 2
, 2014
, pp. 77
–83
. https://doi.org/10.1111/corg.120596.
Giroud
, X.
and Mueller
, H. M.
, “Corporate Governance, Product Market Competition, and Equity Prices
,” J. Finance
, Vol. 66
, 2011
, pp. 563
–600
. https://doi.org/10.1111/j.1540-6261.2010.01642.x7.
Tzeng
, G. H.
and Huang
, J. J.
, Multiple Attribute Decision Making: Methods and Applications
, CRC Press
, Boca Raton, FL
, 2011
.8.
Peng
, K. H.
and Tzeng.
G. H.
, “A Hybrid Dynamic MADM Model for Problems-improvement in Economics and Business
,” Technol. Econ. Dev. Econ.
, Vol. 19
, No. 4
, 2013
, pp. 638
–660
. https://doi.org/10.3846/20294913.2013.8371149.
Kleffner
, A. E.
, Lee
, R. B.
, and McGannon
, B.
, “The Effect of Corporate Governance of the Use of Enterprise Risk Management: Evidence From Canada
,” Risk Manage. Insur. Rev.
, Vol. 6
, No. 1
, 2003
, pp. 53
–73
. https://doi.org/10.1111/1098-1616.0002010.
Bayrakdaroglu
, A.
, Ersoy
, E.
, and Citak
, L.
, “Is There a Relationship Between Corporate Governance and Value-Based Financial Performance Measures? A Study of Turkey as an Emerging Market
,” Asia-Pacific J. Financ. Studies
, Vol. 41
, No. 2
, 2012
, pp. 224
–239
. https://doi.org/10.1111/j.2041-6156.2012.01071.x11.
Jensen
, M.
and Meckling
, W.
, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure
,” J. Financ. Econ.
, Vol. 3
, No. 4
, 1976
, pp. 305
–360
. https://doi.org/10.1016/0304-405X(76)90026-X12.
Daily
, C.
and Dalton
, D.
, “Bankruptcy and Corporate Governance: The Impact of Board Composition and Structure
,” Acad. Manage.
, Vol. 37
, No. 6
, 1994
, pp. 1603
–1617
. https://doi.org/10.2307/25680113.
Solomon
, J. F.
, Solomon
, A.
, Norton
, S. D.
, and Joseph
, N. L.
, “A Conceptual Framework for Corporate Risk Disclosure Emerging from the Agenda for Corporate Governance Reform
,” Br. Account. Rev.
, Vol. 32
, No. 4
, 2000
, pp. 447
–478
. https://doi.org/10.1006/bare.2000.014514.
Kiel
, G. C.
and Nicholson
, G. J.
“Board Composition and Corporate Performance: How the Australian Experience Informs Contrasting Theories of Corporate Governance
,” Corp. Govern.: Int. Rev.
, Vol. 11
, No. 3
, 2003
, pp. 189
–205
. https://doi.org/10.1111/1467-8683.0031815.
Zéghal
, D.
and Gouiaa
, R.
, “The Effect of the Board of Directors' Characteristics on the Financing Strategies of French Companies
,” J. Int. Manage. Studies
, Vol. 4
, 2009
, pp. 1
–11
.16.
Ali
, A.
and Nasir
, S. B.
, “Impact of Board Characteristics and Audit Committee on Financial Performance: A Study of Manufacturing Sector of Pakistan
,” Res. J. Finance Account.
, Vol. 5
, No. 7
, 2014
, pp. 144
–151
.17.
Yermack
, D.
, “Higher Market Valuation of Companies with a Small Board of Directors
,” J. Financ. Econ.
, Vol. 40
, No. 2
, 1996
, pp. 185
–211
. https://doi.org/10.1016/0304-405X(95)00844-518.
Brenes
, E. R.
, Madrigal
, K.
, and Requena
, B.
, “Corporate Governance and Family Business Performance
,” J. Bus. Rev.
, Vol. 64
, No. 3
, 2011
, pp. 280
–285
. https://doi.org/10.1016/j.jbusres.2009.11.01319.
Klein
, A.
, “Audit Committee, Board of Director Characteristics, and Earnings Management
,” NYU Working Paper No. 2451/27450
, NYU
, New York
, 2006
.20.
Abor
, J.
and Biekpe
, N.
, “What Determines the Capital Structure of Listed Firms in Ghana?
” Afr. Finance J.
, Vol. 7
, No. 1
, 2005
, pp. 37
–48
.21.
Joh
, S. W.
and Jung
, Y. J.
, “The Effects of Outside Board on Firm Value in the Emerging Market from the Perspective of Information Transaction Cost
,” Asia-Pacific J. Financ. Studies
, Vol. 41
, No. 2
, 2012
, pp. 175
–193
. https://doi.org/10.1111/j.2041-6156.2012.01069.x22.
Beatty
, R. P.
and Zajac
, E. J.
, “Managerial Incentives, Monitoring, and Risk Bearing: A Study of Executive Compensation, Ownership, and Board Structure in Initial Public Offerings
,” Admin. Sci. Q.
, Vol. 39
, No. 2
, 1994
, pp. 313
–335
. https://doi.org/10.2307/239323823.
Chiou
, J. R.
, Hsiung
, T. C.
, and Kao
, L.
, “A Study on the Relationship between Financial Distress and Collateralized Shares
,” Taiwan Account. Rev.
, Vol. 3
, No. 1
, 2002
, pp. 79
–111
.24.
Michel
, A.
, Oded
, J.
, and Shaked
, I.
, “Ownership Structure and Performance: Evidence From the Public Float in IPOs
,” J. Bank. Finance
, Vol. 40
, 2014
, pp. 54
–61
. https://doi.org/10.1016/j.jbankfin.2013.11.01825.
Wiwattanakantang
, Y.
, “Controlling Shareholders and Corporate Value: Evidence From Thailand
,” Pacific-Basin Finance J.
, Vol. 9
, No. 4
, 2001
, pp. 323
–362
. https://doi.org/10.1016/S0927-538X(01)00022-126.
La Porta
, R.
, Lopez-De-Silanes
, F.
, and Shleifer
, A.
, “Investor Protection and Corporate Valuation
,” J. Finance
, Vol. 57
, No. 3
, 2002
, pp. 1147
–1170
. https://doi.org/10.1111/1540-6261.0045727.
Amihud
, Y.
and Lev
, B.
, “Risk Reduction as a Managerial Motive for Conglomerate Mergers
,” Bell J. Econ.
, Vol. 12
, No. 2
, 1981
, pp. 605
–617
. https://doi.org/10.2307/300357528.
Leaven
, L.
and Levine
, R.
, “Corporate Governance, Regulation, and Bank Taking
,” J. Financ. Econ.
, Vol. 93
, No. 2
, 2009
, pp. 259
–275
. https://doi.org/10.1016/j.jfineco.2008.09.00329.
Ali
, A.
, Chen
, T.
, and Radhakrishnan
, S.
, “Corporate Disclosures by Family Firms
,” J. Account. Econ.
, Vol. 44
, Nos. 1–2
, 2007
, pp. 238
–286
. https://doi.org/10.1016/j.jacceco.2007.01.00630.
Jaggi
, B.
, Leung
, S.
, and Gul
, F.
, “Family Control, Board Independence and Earnings Management: Evidence Based on Hong Kong Firms
,” J. Account. Public Policy
, Vol. 28
, No. 4
, 2009
, pp. 281
–300
. https://doi.org/10.1016/j.jaccpubpol.2009.06.00231.
Claessens
, S.
, Djankov
, S.
, Fan
, J. P. H.
, and Lang
, L. P. H.
, “Disentangling the Incentive and Entrenchment Effects of Large Shareholdings
,” J. Finance
, Vol. 57
, No. 6
, 2002
, pp. 2741
–2771
. https://doi.org/10.1111/1540-6261.0051132.
Fan
, J. P. H.
and Wang
, T. J.
, “Corporate Ownership Structure and the Informativeness of Accounting Earnings in East Asia
,” J. Account. Econ.
, Vol. 33
, No. 3
, 2002
, pp. 401
–425
. https://doi.org/10.1016/S0165-4101(02)00047-233.
Kim
, Y.
and Gao
, F. Y.
, “Does Family Involvement Increase Business Performance? Family-Longevity Goals' Moderating Role in Chinese Family Firms
,” J. Bus. Res.
, Vol. 66
, No. 2
, 2013
, pp. 265
–274
. https://doi.org/10.1016/j.jbusres.2012.08.01834.
Waring
, A.
, “Strategies of Risk Management Organizations: A Case Review
,” Risk Manage.
, Vol. 4
, 2002
, pp. 23
–41
. https://doi.org/10.1057/palgrave.rm.824012435.
ISO 31000:
AS/NZS: Risk Management-Principles and Guidelines
, Standards Australia
, Sydney, Australia
, 2009
.36.
McCrae
, M.
and Balthazor
, L.
, “Integrating Risk Management into Corporate Governance: The Turnbull Guidance
,” Risk Manage.
, Vol. 2
, No. 3
, 2000
, pp. 35
–45
. https://doi.org/10.1057/palgrave.rm.824005737.
Power
, M.
, “The Risk Management of Nothing
,” Account. Org. Soc.
, Vol. 34
, Nos. 6–7
, 2009
, pp. 849
–855
. https://doi.org/10.1016/j.aos.2009.06.00138.
Waldman
, D. A.
, Ramíez
, G. G.
, House
, R. J.
, and Puranam
, P.
, “Does Leadership Matter? CEO Leadership Attributes and Profitability Under Conditions of Perceived Environmental Uncertainty
,” Acad. Manage. J.
, Vol. 44
, No. 1
, 2001
, pp. 134
–143
. https://doi.org/10.2307/306934139.
Hambrick
, D. C.
and Mason
, P. A.
, “Upper Echelons: The Organization as a Reflection of its Top Managers
,” Acad. Manage. Rev.
, Vol. 9
, No. 2
, 1984
, pp. 193
–206
.40.
Goel
, A. M.
and Thakor
, A. V.
, “Overconfidence, CEO Selection, and Corporate Governance
,” J. Finance
, Vol. 63
, No. 6
, 2008
, pp. 2737
–2784
. https://doi.org/10.1111/j.1540-6261.2008.01412.x41.
Matta
, E.
and McGuire
, J.
, “Too Risky to Hold? The Effect of Downside Risk, Accumulated Equity Wealth, and Firm Performance on CEO Equity Reduction
,” Org. Sci.
, Vol. 9
, No. 4
, 2008
, pp. 567
–580
. https://doi.org/10.1287/orsc.1070.033442.
Stevens
, J. M.
, Steensma
, H. K.
, Harrison
, D. A.
, and Cochran
, P. L.
, “Symbolic or Substantive Document? The Influence of Ethics Codes on Financial Excutives' Decisions
,” Strat. Manage. J.
, Vol. 26
, No. 2
, 2005
, pp. 181
–195
. https://doi.org/10.1002/smj.44043.
Hopwood
, A. G.
, “The Economic Crisis and Accounting: Implications for the Research Community
,” Account. Org. Soc.
, Vol. 34
, Nos. 6–7
, 2009
, pp. 797
–802
. https://doi.org/10.1016/j.aos.2009.07.00444.
Bushman
, R. M.
and Smith
, A. J.
, “Financial Accounting Information and Corporate Governance
,” J. Account. Econ.
, Vol. 32
, Nos. 1–3
, 2001
, pp. 237
–333
. https://doi.org/10.1016/S0165-4101(01)00027-145.
Andrade
, S. C.
, Bernile
, G.
, and Hood
F. M.
, III, “SOX, Corporate Transparency, and the Cost of Debt
,” J. Bank. Finance
, Vol. 38
, 2014
, pp. 145
–165
. https://doi.org/10.1016/j.jbankfin.2013.10.00146.
Henry
, L. J.
and Attavitkamtorn
, P.
, “Governmental Accounting and Auditing in Thailand: An Overview and Some Suggestions for Improvement
,” Int. J. Account.
, Vol. 34
, No. 3
, 1999
, pp. 439
–454
. https://doi.org/10.1016/S0020-7063(99)00024-247.
Sikka
, P.
, “Financial Crisis and the Silence of the Auditors
,” Account. Org. Soc.
, Vol. 34
, Nos. 6–7
, 2009
, pp. 868
–873
. https://doi.org/10.1016/j.aos.2009.01.00448.
Fontela
, E.
and Gabus
, A.
, The DEMATEL Observer
, Battelle Institute, Geneva Research Center
, Carouge, Switzerland
, 1976
.49.
Tzeng
, G. H.
and Huang
, C. Y.
, “Combined DEMATEL Technique With Hybrid MCDM Methods for Creating the Aspired Intelligent Global Manufacturing & Logistics Systems
,” Ann. Oper. Res.
, Vol. 19
, No. 1
, 2012
, pp. 7159
–7190
.50.
Liou
, J. J. H.
and Tzeng
, G. H.
, “Comments on ‘Multiple Criteria Decision Making (MCDM) Methods in Economics: An Overview’
,” Technol. Econ. Dev. Econ.
, Vol. 18
, No. 4
, 2012
, pp. 672
–695
. https://doi.org/10.3846/20294913.2012.75348951.
Liou
, J. J. H.
, “New Concepts and Trends of MCDM for Tomorrow—In Honor of Professor Gwo-Hshiung Tzeng on the Occasion of his 70th Birthday
,” Technol. Econ. Dev. Econ.
, Vol. 19
, No. 2
, 2013
, pp. 367
–375
. https://doi.org/10.3846/20294913.2013.81103752.
Liou
, J. J. H.
, Chuang
, Y. C.
, and Tzeng
, G. H.
, “A Fuzzy Integral-based Model for Supplier Evaluation and Improvement
,” Inf. Sci.
, Vol. 266
, 2014
, pp. 199
–217
. https://doi.org/10.1016/j.ins.2013.09.02553.
Chen
, F. H.
and Tzeng
, G. H.
, “Probing Organization Performance Using a New Hybrid Dynamic MCDM Method Based on the Balanced Scorecard Approach
,” J. Test. Eval., (in press).54.
Lu
, M. T.
, Tzeng
, G. H.
, and Hu
, S. K.
, “Evaluating the Implementation of Business-to-Business M-Commerce by SMEs Based on a New Hybrid MADM Model
,” Manage. Dec., (in press).55.
Lu
, M. T.
, Tzeng
, G. H.
, Cheng
, H.
, and Hsu
, C. C.
, “Exploring Mobile Banking Services for User Behavior in Intention Adoption: Using New Hybrid MADM Model
,” Serv. Bus., (in press).56.
Hu
, S. K.
, Lu
, M. T.
, and Tzeng
, G. H.
, “Exploring Smart Phone Improvements Based on a Hybrid MCDM Model
,” Exp. Syst. Appl.
, Vol. 41
, No. 9
, 2014
, pp. 4401
–4413
. https://doi.org/10.1016/j.eswa.2013.12.05257.
Saaty
, T. L.
, Decision Making with Dependence and Feedback: Analytic Network Process
, RWS Publications
, Pittsburgh, PA
, 1996
.58.
Ou Yang
, Y. P.
, Shieh
, H. M.
, and Tzeng
, G. H.
, “A VIKOR Technique Based on DEMATEL and ANP for Information Security Risk Control Assessment
,” Inf. Sci.
, Vol. 232
, 2012
, pp. 482
–500
. https://doi.org/10.1016/j.ins.2011.09.01259.
Lu
, S. T.
, Lin
, C. W.
, Dai
, Y. F.
, and Shiue
, Y. C.
, “The Evaluation Criteria of Recruiting Local Staffs for Taiwanese Enterprise in China
,” J. Test. Eval.
, Vol. 42
, No. 1
, 2014
, JTE120314.60.
Lin
, C.
, Chen
, C.
, and Ting
Y.
, “A Green Purchasing Model by Using ANP and LP Methods
,” J. Test. Eval.
, Vol. 40
, No. 2
, 2012
, JTE104259. https://doi.org/10.1520/JTE10425961.
Tsai
, W. H.
, Chou
, W. C.
, and Leu
, J. D.
, “An Effectiveness Evaluation Model for the Web-Based Marketing of the Airline Industry
,” Exp. Syst. Appl.
, Vol. 38
, No. 12
, 2011
, pp. 15499
–15516
.62.
Tsai
, W. H.
, Lee
, P. L.
, Shen
, Y. S.
, and Hwang
, E. T.
, “A Combined Evaluation Model for Encouraging Entrepreneurship Policies
,” Ann. Oper. Res.
(Last accessed 24 July 2014). https://doi.org/10.1007/s10479-011-1029-663.
Lin
, C.
and Tsai
M.
, “Evaluating the Optimal City in South China for New Medical Facilities: The Application Modified Porter's Diamond Framework
,” J. Test. Eval.
, Vol. 38
, No. 4
, 2010
, JTE102555. https://doi.org/10.1520/JTE10255564.
Shen
, K. Y.
, Yan
, M. R.
, and Tzeng
, G. H.
, “Combining VIKOR-DANP Model for Glamor Stock Selection and Stock Performance Improvement
,” Knowl Based Syst.
, Vol. 58
, 2014
, pp. 86
–97
. https://doi.org/10.1016/j.knosys.2013.07.02365.
Opricovic
, S.
and Tzeng
, G. H.
, “Extended VIKOR Method in Comparison with Outranking Methods
,” Eur. J. Oper. Res.
, Vol. 178
, No. 2
, 2007
, pp. 514
–529
. https://doi.org/10.1016/j.ejor.2006.01.02066.
Hsu
, C. H.
, Wang
, F. K.
, and Tzeng
, G. H.
, “The Best Vendor Selection for Conducting the Recycled Material based on a Hybrid MCDM Model Combining DANP with VIKOR
,” Resour., Conserv. Recycling
, Vol. 66
, 2012
, pp. 95
–111
. https://doi.org/10.1016/j.resconrec.2012.02.00967.
Liu
, C. H.
, Tzeng
, G. H.
, and Lee
, M. H.
, “Strategies for Improving Cruise Product Sales in the Travel Agency—Using Hybrid MCDM Models
,” Serv. Ind. J.
, Vol. 33
, No. 5
, 2013
, pp. 542
–563
. https://doi.org/10.1080/02642069.2011.61434268.
Chen
, Y.
, Ke
, H.
, and He
K.
, “A New Method for Threat Assessment and Uncertainty Analysis of Air-Raid-Target-Based on Connection Number
,” J. Test. Eval.
, Vol. 40
, No. 6
, 2012
, JTE104273. https://doi.org/10.1520/JTE10427369.
Tsai
, W. H.
, Chou
, W. C.
, and Lai
, C. W.
, “An Effective Evaluation Model and Improvement Analysis for National Park Websites: A Case Study of Taiwan
,” Tour. Manage.
, Vol. 31
No. 6
, 2010
, pp. 936
–952
. https://doi.org/10.1016/j.tourman.2010.01.01670.
Zeleny
, M.
, Multiple Criteria Decision Making
, McGraw-Hill
, New York
, 1982
.71.
Hu
, S. K.
, Chuang
, Y. C.
, Yeh
, Y. F.
, and Tzeng
, G. H.
, “Combining Hybrid MADM with Fuzzy Integral for Exploring the Smart Phone Improvement in M-Generation
,” Int. J. Fuzzy Syst.
, Vol. 14
, No. 2
, 2012
, pp. 204
–214
.
This content is only available via PDF.
All rights reserved. This material may not be reproduced or copied, in whole or part, in any printed, mechanical, electronic, film, or other distribution and storage media, without the written consent of ASTM International.
You do not currently have access to this content.
