Abstract
The purpose of this thesis is to examine whether the establishment of compensation committee improves the corporate governance by measuring the effectiveness of the compensation committee quality (CCQ) for top managers’ stock option grants and future firm performance. Since the information disclosure difference in Taiwan, we apply the data of top managers instead of CEO. The two stage least squares (2SLS) model from Sun et al. (2009) will be adjusted to fit the disparate status. Furthermore, we consider ROA and ROE as multiple types of future performance and apply the treatment effect model to detect using stock option grants will bring out different future firm performance or not. To sum up, CCQ performs not well due to the immature mechanism and it seems that the stock option grants bring out negative effect to future firm performance because of the policy of “Expensing employee bonus” which started from 2008.