Independent Directors, Critical Mass and Firm Performance : Empirical Evidence from a Natural Experiment in Taiwan

We examine the impact on firm performance of independent directors as a minority group. We find that, when there are only one or two independent directors, firm performance suffers, while with three or more independent directors it improves. We use the changes in independent director composition mandated by the Amendment of Security and Exchange Act in Taiwan as a natural experiment for identifying firms to be studied. Our results confirm the tokenism and critical mass theories reported in other board composition literature