The Role of Internal and External Corporate Governance Mechanisms on Firm’s Financial Performance in Malaysia

Chang, Allan

doi:10.17576/ajag-2015-6-06

Cited by 4 publications

(5 citation statements)

References 29 publications

(39 reference statements)

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“…However, the findings cannot prove that institutional investors can enhance company performance. These findings align with previous studies that argue that Malaysian institutional investors lack the motivation to monitor due to a lack of resources and have dispersed in business (Annuar, 2019; Chang, 2015; Katan & Mat Nor, 2015). When segregating the sample base on the pre‐MCCG 2017 and post‐MCCG 2017 period, institutional investors are found to strengthen the association between ethics and company profitability during pre‐MCCG 2017.…”

Section: Discussionsupporting

confidence: 91%

“…Regarding the moderating effect of institutional investors (INVEST) on the relationship between ETHICS and financial performance (models 4, 5 and 6), no evidence is shown to support the interactions of institutional investors with commitment to ethics (ETHICS*INVEST) towards the financial performance; thus, hypothesis (2) is rejected. The findings are consistent with prior empirical evidence in Malaysia, that there is little evidence to suggest that institutional investors play a significant role in influencing the performance of companies (Abdulsamad & Wan Yusoff, 2016; Chang, 2015; Katan & Mat Nor, 2015). Such evidence could be due to the lack of stakes in investee companies, limited resources and pursuit of short‐term objectives (Annuar, 2019).…”

Section: Findings and Discussionsupporting

confidence: 90%

“…rejected. The findings are consistent with prior empirical evidence in Malaysia, that there is little evidence to suggest that institutional investors play a significant role in influencing the performance of companies (Abdulsamad & Wan Yusoff, 2016;Chang, 2015;Katan & Mat Nor, 2015). Such evidence could be due to the lack of stakes in investee companies, limited resources and pursuit of short-term objectives (Annuar, 2019).…”

Section: Panel Data Regressionsupporting

confidence: 89%

“…For example, institutional investors are shown to moderate the association between CSR and firm performance (Alshammari, 2015; Nguyen et al, 2017); the relationship involving R&D and corporate performance (Scott, 2014); and the relationship between management control and earnings management (Ratnawati & Abdul Hamid, 2015). However, studies based on Malaysian data suggest a lack of evidence on how institutional investors relate to the performance of companies (Abdulsamad & Wan Yusoff, 2016; Chang, 2015; Katan & Mat Nor, 2015). Such evidence could be due to the lack of stakes in investee companies, limited resources and pursuit of short‐term objectives (Annuar, 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

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Ethical commitment, institutional investors and financial performance: Malaysian evidence

et al. 2022

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This study investigates whether institutional investors moderate the relationship between ethical commitment and financial performance amongst Malaysian companies. Through the role of institutional investors, the external monitoring mechanism is expected to reduce the cost associated with the agency problem amongst Malaysian companies, as shown by the lack of ethical practises. Using data from 429 publicly listed companies on the Main Board of Bursa Malaysia from 2012 to 2021, the results show that companies with higher ETHICS have better financial performance than companies with lower ETHICS. However, the findings on the moderating effect of institutional investors cannot be proven. By separating the sample based on pre‐MCCG 2017, institutional investors were found to have an association between ETHICS and performance, but no evidence was found during the period post‐MCCG 2017. This study adds to the perspective of agency theory in the academic literature, of which companies can create values by being committed to higher ethical practises. Results on the moderating effect of institutional investors provide perspective on external monitoring mechanisms in the Malaysian market because they are found to have a monitoring role in enhancing corporate performance. However, such a role decreases after the introduction of MCCG 2017. This study provides insights for Malaysian regulators on the necessity to keep promoting ethical practises and transparency amongst companies to achieve the goals of the National Anti‐Corruption Plan 2019–2023. The ethical practises, however, are not limited to listed companies, and regulators should also consider monitoring the institutions within the capital market.

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Section: Discussionsupporting

confidence: 91%

Section: Findings and Discussionsupporting

confidence: 90%

Section: Panel Data Regressionsupporting

confidence: 89%

Section: Literature Reviewmentioning

confidence: 99%

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Ethical commitment, institutional investors and financial performance: Malaysian evidence

et al. 2022

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“…Academicians have examined many issues relating to MM and corporate governance (Amran & Che-Ahmad 2013;Banerjee et al 2012;Chang 2015;Fodio et al 2013;Liu et al 2012;Mustapha & Che-Ahmad 2009;MohamadNor et al 2010). Some are just on directorship MM only (Gamba & Goldstein 2009;Latif, Kamardin, Nisham, Mohd & Adam 2013).…”

Section: Introductionmentioning

confidence: 99%

Block-holders and Monitoring Mechanisms in Nigeria

Arowolo

Ahmad²

2017

AJAG

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Material accounting misstatements: Do managerial overconfidence, financial distress, and corporate governance practices matter?

Azhari

Hasnan

Sanusi

et al. 2022

CBSR

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This study examined factors related to the occurrence of material accounting misstatements in Malaysian public listed companies (PLCs). Two factors, motivation and opportunity, were assessed in this study. According to Jensen (1993), as the consequences of material accounting misstatement can be extremely detrimental to the firms and their employees, the occurrence of such affairs must be driven by strong motivation and a great opportunity. The motivation factors consist of managerial overconfidence and financial distress, while the opportunity factors include internal and external corporate governance practices. A total of 103 misstatement and 103 non-misstatement firms, gathered from 2010 to 2018, were examined. Univariate and binary logistic regression analyses were deployed to test the hypotheses. Evidently, highly financial distress, a higher proportion of board independence, the practice of CEO duality, and a larger size of borrowings exerted a significantly positive relationship with material accounting misstatements. Interestingly, a higher proportion of independent board members encouraged the likelihood of material accounting misstatements instead of mitigating such mishaps. This study provides insights to regulators on the efficacy of corporate governance practices in curbing material accounting misstatements. The study addresses the element of managerial overconfidence, which was previously limited to studies on capital structure and leverage decisions.

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The Role of Internal and External Corporate Governance Mechanisms on Firm’s Financial Performance in Malaysia

Cited by 4 publications

References 29 publications

Ethical commitment, institutional investors and financial performance: Malaysian evidence

Ethical commitment, institutional investors and financial performance: Malaysian evidence

Block-holders and Monitoring Mechanisms in Nigeria

Material accounting misstatements: Do managerial overconfidence, financial distress, and corporate governance practices matter?

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