Using a panel of 665 Taiwanese listed firms during a 10-year period (2002-2011), this study tests whether there is an optimal level of director compensation, which maximizes firm value. This work adopts Tobin’s Q as the proxy for firm value and finds that director compensation between 0.0283% and 2.3077% is an optimal level of director compensation to maximize firm value. This shift in financing sources propels the nonlinear relationship uncovered in this study and sheds light on Taiwan’s legal system of director compensation .
