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TWSE Corporate Governance 100 Index New Focus of Corporate Social Responsibility Index

Publish time:2015-07-03

The Taiwan Stock Exchange (TWSE) announced the launch of the ‘TWSE Corporate Governance 100 Index’at the Information Centre of Taipei 101 on June 29th. In February, the Financial Supervisory Commission (FSC) included the Corporate Governance Index in the ‘Market Uplift Plan’ so as to enhance the corporate governance and market value of listed companies in Taiwan. In response to this, TWSE compiled the Corporate Governance Index; the selection of the constituents is based on the results of Corporate Governance Evaluation, and also the liquidity and financial indicators of the listed companies. The TWSE hopes that such a move can attract more investments to the Taiwan’s market, and listed companies are encouraged to attach more importance to corporate governance.
 
The ‘TWSE Corporate Governance 100 Index’ selected those companies listed on the TWSE (Primary domestic and foreign companies - TDRs  excluded). The TWSE based the index on the top 20% of companies from the Corporate Governance Evaluation released on April 30, and on the companies’ liquidity and 3 other financial indicators (book value per share not lower than par value, net profit after tax ranking and growth rate ranking). The selected 100 companies are then weighted by market value for the index calculation. The Index Base Date is 15 June 2015 with 5,000 index points. A review is to be conducted in July every year and the number of  constituents remains at 100.
 
According to the data, the 2014 ‘TWSE Corporate Governance 100 Index constituents’ average earnings per share (EPS) and average price-book ratio (P/B ratio) are 3.59 and 1.73 respectively, which are higher than TAIEX’s 2.39 and 1.59. Besides, the constituents’ average return of earning (ROE) achieved 12.24, which is double the TAIEX’s 6.77. Research shows that companies with good corporate governance not only carry a premium stock but also achieve higher profits and business efficiency. If  major fund management institutions could be licensed to use ‘TWSE Corporate Governance 100 Index’ as investment benchmark or investment trust companies could be licensed to issue passive investment products based on the index, it can attract more investment to those companies with good corporate governance and which achieved higher profits in the previous year. This in turn would encourage enterprises to put more efforts on  corporate governance and social responsibilities.
 
The launch of the ‘TWSE Corporate Governance 100 Index’ has further developed the indexing of corporate social responsibility in Taiwan’s securities market. It also encourages the TWSE to continually promote passive investing, develop indexed products and achieve the goal of ’More diversified financial products, ensuring a secure investment  environment for the public’, hence injecting further momentum to the Taiwan’s securities market.