Abstract
My intention is to explore the firm stability in corporate governance from the perspective of transaction cost variability. First, I explore the implications of firm stability by telling the divisions between the transaction cost expectation and variability. Second, I indicate in the time process, in order to keep the firm stability under the influences of external and internal factors, the firm engaging in adjusting activities has to overcome various kinds of transaction costs. In order to compare the firm stability of different organizations, I define the firm stability as the transaction cost variability. Using this definition, I prove that the organization has a better firm stability with smaller individual transaction cost variability differences between directors and more concentrated stock holding proportions. Finally, I discuss the influences of the independent director to the firm stability. I find that without specific conditions, the independent director has no obvious influences to the firm stability in different organizations. However, by adding a specific condition, I obtain a testable proposition: under the condition of information and communication technology progress, in the organization with broader individual transaction cost variability differences between directors and more dispersed stock holding proportions, the independent director has more positive influences to the firm stability. Key Words: firm stability, transaction cost variability, corporate governance, board of directors, independent directors