Internal Governance and Financial Operation of National Universities: Does governance reform after incorporation improve university management?

Since incorporation in fiscal 2004, national universities have undertaken institutional reforms of their governing structure and discretionary budgeting, in an effort to improve efficiency by strengthening incentives through autonomy and independence. As a result of these efforts, national universities have established a governance system with the university president at the core of the institution in order to conduct voluntary, efficient and effective university management. But is this structure functioning as effectively as originally intended? To date, no data-based empirical verification has taken place in order to answer this question. Therefore, this paper uses data to verify the effect of the governing structure of national universities on their financial performance.

By estimating the governance of universities using variables that show the decision making of the board of directors and the auditing body and the leadership of the president as organizational factors, we see that improved decision-making by the board of directors and the auditing body and stronger leadership by the president reduces the dependence on subsidies and raises the proportions of donations, funded research, and funded businesses. It also becomes clear that stronger leadership by the president reduces the ratio of personnel expenses and raises research expenses for individual teaching staff and that greater involvement by the auditing body in decision making lowers educational expenses per-student.

Given that the purpose of incorporation is the efficient management of a university by creating a governance structure based on stronger presidential authority, it is possible to view the results of this paper as an indication that the objectives sought by the institutional reforms are headed toward fruition. It is hoped that as university presidents exercise their leadership roles, we will see the creation of a governance system that will ensure the quality of education and research and improve financial efficiency.