Do better-governed firms enhance shareholders’ value? A study of corporate governance index firms

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Abstract

Malaysia has taken various actions to improve the corporate governance (CG) mechanisms and practices for all listed firms. In 2011, the Malaysian Corporate Governance Index (MCGI) was released, and before that, in 2009, the blueprint of MCGI was introduced. As a result, MCGI released annually the top 100 listed Malaysian firms that have been classified and ranked as the well-governed firms from its corporate governance compliance and disclosure. This study examines the efficacy of MCGI on shareholders’ value over the 12-year periods from 2008 to 2019 and compares pre- and post-CG Blueprint. A generalized least square (GLS) method is employed as it fits the data characteristics in this study, and robust results are yielded. The results reveal that MCGI, firm size, ROA, and female directors exhibit a significant impact on shareholders’ value while leverage and growth yield non-significant effects on shareholders’ value. Overall, firms tend to use external financing rather than internal financing as the preferred option. This supports the contention that trade-off theory was adopted in the Malaysian context for the study period. However, this result is unstable over time; therefore, an up-to-date investigation of its relationship is necessary.

Keywords: Corporate Governance, Shareholders’ Value, Malaysian Corporate Governance Index (MCGI), Malaysian Listed-Firms

Authors’ individual contribution: Conceptualization — A.B., P.H., and F.F.; Methodology — F.F.; Writing — Original Draft — A.B., P.H., and F.F.; Writing — Review & Editing — F.F.; Supervision — A.B. and P.H.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G32, G34

Received: 10.11.2021
Accepted: 07.04.2022
Published online: 11.04.2022

How to cite this paper: Basyith, A., Ho, P., & Fauzi, F. (2022). Do better-governed firms enhance shareholders’ value? A study of corporate governance index firms. Journal of Governance & Regulation, 11(2), 107–115. https://doi.org/10.22495/jgrv11i2art9