Can good corporate governance practices contribute to firms' financial performance? ? evidence from Malaysian companies

Abstract

This paper examines the impact of corporate governance practices and structures on the performance of firms in Malaysia. An empirical study was conducted based on data involving 120 Malaysian-listed companies over a four-year period from 1996 to 1999. This period encompassed the 1997/98 Asian financial crisis, which affected most countries in the Southeast Asian region including Malaysia. Due to the combination of cross-sectional and time-series data, panel data regression techniques were used to analyse performance of the firms using both fixed effects and random effects models. Using Return on Equity (ROE) as the dependent variable, it was established that the size of firm, gearing ratio (borrowing) and dominant CEOs (Chief Executive Officers) significantly influenced the performance of firms. The impact of size on the performance of firms followed a quadratic fashion with performance increasing with the size of the firm up to the optimal size of around 7,729 million Malaysian Ringgit (RM). Beyond that, firm performance declined with increasing size. Borrowing had a negative effect on earnings with 1% increase in borrowing having a 0.13% decrease in ROE. Finally, CEOs who are also chairman of the board exert a positive influence on company earnings. The study suggests that dominant CEOs could increase performance of firms when they dominate the decision-making process in their companies.

Impact of Corporate Governance on Social and Environmental Information Disclosure of Malaysian Listed Banks: Panel Data Analysis

“…The prior researchers such as Ho and Wong (2001), Chau and Gray (2002) and Haniffa and Cooke (2002) also find that the level of information disclosure is likely to be less in insider or family-controlled companies. Secondly, since they have the controlling rights, they may be in a better position to expropriate company assets and exploit the interest of the minority (Leng and Shazaili, 2005;Zulkarnain, 2007). Due to that they might discourage the higher disclosure.…”

The Voluntary Disclosure of Malaysian Executive Directors’ Remuneration under an Evolving Regulatory Framework

“…Earlier Malaysian studies focused on overall corporate governance measures (Zulkafli, Abdul Samad, & Ismail, 2004) on factors that affect their implementation (Haniffa & Cooke, 2002;Mohd Ghazali & Weetman, 2006;Ngui, Voon, & Lim, 2008) on the actual compliance of Malaysian firms with the corporate reforms (Christopher & Hassan, 2005); and on the impact of adopting corporate governance measures on firms or on Malaysian market indices (Abdul Wahab, How, & Verhoeven, 2007;Aik Leng & Abu Mansor, 2005;Nowland, 2008). These studies did not focus on the disclosure of Malaysian executive directors' remuneration.…”

Governance and ownership in Malaysia: their impacts on corporate performance

“…By contrast, Jackling and Johl (2009), Ofoeda (2017) and Puni and Anlesinya (2020) observed no significant relationship between combined role and corporate performance. In Malaysia, Rahman and Haniffa (2005) reported a negative relationship, while Leng and Abu Mansor (2005) found a positive relationship between role duality and corporate performance. As the MCCG specifically lists role separation as one of its recommendations, companies which follow this recommendation are expected to perform better than others.…”