CORPORATE GOVERNANCE AND FINANCIAL PERFORMANCE OF PUBLIC LISTED COMPANIES IN MALAYSIA

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Abstract

This study investigates a link between corporate governance and ownership structures on firm performance of 293 companies listed on the Main and Second Board of Bursa Malaysia from 2000-2006. A dynamic panel system generalized method of moment technique is applied to control the endogeneity effect. After controlling for size, gearing, industry and time, this study finds significant positive relationships between institutional and foreign shareholdings using both market and accounting performance measures. These results imply their positive roles in constraining any opportunistic behavior of management. Interestingly, role duality (positions of Chairman and CEO were the same person) was observed to be negatively related to both performance measures, thus supporting the recommendation by Malaysian Code of Corporate Governance (MCCG). However, contrary to agency theory and MCCG, firm performance decreases with the increase in proportion of independent directors in the board.

Keywords: Corporate Governance, Agency Theory, Stewardship Theory, Resource Dependency Theory

How to cite this paper: Lim, K. P., Ismail, H., & Eze, U. C. (2014). Corporate governance and financial performance of public listed companies in Malaysia. Corporate Ownership & Control, 12(1-9), 781-801. https://doi.org/10.22495/cocv12i1c9p3