Relative to other emerging markets, HK’s legal
system is considered one of the best. According to La
Porta et al. (1998), HK has the highest scoring in
shareholder rights, creditor rights, and efficiency
of the judicial system throughout the world. The
directors carry legal liabilities when overseeing the
company’s management and operations. This may
also improve the effectiveness of independent
directors of HK, as the liabilities of directors’ duty
could be much larger than their remuneration2 from
the position itself. Under this superior legal system,
we can investigate whether board structure plays an
important role or not.