Corporate Governance Structure And Performance Of Malaysian Listed Companies Pdf

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The paper examined the moderating role of independent directors in the relationship between ownership structure and firm performance. The result means that in a company where directors have controlling shares, having independent directors on the board will enhance performance since there will be alignment of interest of board and shareholders. On the other hand, the independent directors influence firm performance negatively in firms with majority ownership by directors since the directors who are the majority shareholders will promote their interest over the interest of the shareholders.

Authors: Md. However, despite the importance of the emerging technology companies in Malaysia in consideration of the modern internet age, there has not been many studies conducted on the Malaysian technology sector in respect of corporate governance. This study aims to partially bridge the research gap by investigating the relationship between selected corporate governance attributes and financial performance of Malaysian technology companies.

SRJ is a prestige metric based on the idea that not all citations are the same. SJR uses a similar algorithm as the Google page rank; it provides a quantitative and qualitative measure of the journal's impact. SNIP measures contextual citation impact by wighting citations based on the total number of citations in a subject field. The aim of this paper is to analyse whether institutional factors determine the level of corporate governance compliance among major listed companies in emerging markets of Latin America, a region characterized by a poor legal system, highly concentrated ownership structures, and capital markets relatively less developed. The paper used an unbalanced panel data consisting of observations of the highest ranked companies on the stock exchange indices of Argentina, Brazil, Chile and Mexico during the period —

Ownership structure, corporate governance and corporate performance in Malaysia

Abstract The paper investigates the relationship between capital structure and firm performance. The investigation has been performed using panel data procedure for a sample of Malaysian listed companies on the Bursa Malaysia Stock exchange during The study uses four performance measures including return on equity, return on asset, Tobin s Q and earning per share as dependent variable.

The five capital structure measure including long term debt, short term debt, total debt ratios and growth as independent variable. Size is a control variable. The data are divided into six sectors which are construction, consumer product, industrial product, plantation, property, trading and service.

Moreover, there is positive relationship between the growth and performance for all the sectors. It also reports that total debt TD has significant negative relationship with the performance of the firm which similar to the above analysis. The paper investigates the relationship between capital structure and firm performance. The study uses four performance measures including return on equity, return on asset, Tobin's Q and earning per share as dependent variable. Raj Yadav, Staff No: , E.

The financial decision set by management is very important in determining the optimal capital structure. The management of the firm itself has to set their capital structure in a way to maximize their firm value and this decision is really important.

However, firms have a different level of leverage and managers try to achieve the best set to attain an optimal capital structure. Modigliani and Miller suggest that in perfect capital market, strategies do not affect the value of the firm, but later they argue that firm value can be increased by changing the capital structure because of tax advantage of debt. MM argue that under very restrictive assumptions of perfect capital markets, investors homogenous expectations, tax free economy and no transaction costs, capital structure is irrelevant in determining firm value.

Investors like to buy undervalued shares and sell shares of overvalued share to obtain an income. As investors exploit these arbitrage opportunities the price of the overvalued price will fall and the undervalued shares will rise, until both prices are equal. However these assumptions do not hold in the real world.

Literature suggests that there is an optimal capital structure, but there is no specific methodology to ensure them to achieve an optimal debt level. However financial theory does provide some help in understanding how the chosen financing mix affects the firms value. This study aims to examine empirically the relation between financing choices: including short term debt STD , long term debt LTD and total debt ratio TD ratios; and firm performance; such as return on assets ROA , return on equity ROE and Tobin's Q over the period in the Malaysian listed companies using a pooling panel data procedure.

Our results indicate that capital structure is significantly and positive associated with firm performance which is measured by Tobin's Q, while report a negative relationship between capital structure and ROA. Moreover, there is no significant relationship between capital structure and ROE. Altogether, our study provides evidence which indicates firm performance is positively or even negatively related to capital structure.

The paper is organized as follow. In the next session, we review some of the theoretical and empirical evidence concerning the capital structure, the following section describes the method of the research, and last session indicates empirical results of the empirical analysis and a discussion of the conclusions that can be derived from the results.

Firms performance is significantly affected by various factors and capital structure is one of the significant factors among them. Lot of empirical studies has been done to explore if there is any Positive, negative or no relation relation between firms performance and capital structure and these studies produced mixed results.

Pathak in his study found that the level of debt has significant negative association with firm performance which is not in accordance with the findings of many studies done for western economies but consistent with some of the studies done for Asian countries.

One important reason of this conflicting result can be the high cost of borrowing in developing countries like India in comparison to western countries. Khan research results were consistent with the Jensen and Meckling agency cost model and didn't found any significant impact of efficiency on leverage. There is evidence towards nonlinearities in the relationship between ownership type with capital structure and firms performance.

Roden and Lewellen examines the capital structure of 48 US firms during the period and revealed a positive relation between profitability and capital structure. Similar results were documented by Champion and Gosh et al. Hadlock and James suggest corporations with high level of profitability use high level of debts. Abor reports a positive relation between capital structure, which measured by STD and TD, and performance over the period in the Ghanian firms. Arbiyan and Safari investigate the effects of capital structure on profitability using Iranian listed firms from to The found short-term and total debts are positively related to profitability ROE which indicate a negative relation between long-term debts and ROE.

Kester found a negative relation between capital structure and performance. In addition, Wiwattanakantang reported a negative relation between book and market leverage and ROA from Thai firms. Haung and song , too found a negative correlation between leverage and performance earning before interest and tax to total assets is China firms.

Chakraborty employed two performance measures, including ration of profit before interest, tax and depreciation to total assets and ratio of cash flows to total assets and two leverage measures, including ration of total borrowing to assets and ratio of liability and equity, and reported a negative relation between these ones.

Ebaid investigates the impact of capital structure choice on performance of 64 firms from in the Egyptian capital market. He employs three accounting -based measures including ROA, ROE and gross profit margin, and concludes capital structure choices, generally, has a weak -to- no impact on firm performance.

San and Heng in their research focused on construction companies which are listed in Main Board of Bursa Malaysia from , the result shows that there is a relationship between capital structure and corporate performance and there is also evidence that shows that no relationship between the variables have been investigated.

A study by Saedi and Mahmoodi examines the relationship between capital structure and firm performance the study used sample of firms listed on Tehran Stock exchange over the period Expect all of the financial companies and banks, the study uses four performance measures including ROA, ROE, EPS and Tobin's Q as dependent variable and three capital structures including long- term debt short -term debt and total debt ration as independent variable.

The study indicated that firm performances, which is measured by EPS and Tobin's Q, is significantly and positively associated with capital structure, while reported a negative relation between capital structure and ROA, and no significant relationship between ROE and Capital structure.

Pratheepkanth analyzed the capital structure and its impact on financial performance capacity during to of Business companies in Sri Lanka. The results shown the relationship between the capital structure and financial performance is negative.

Razak and Aliahmed examines the impact of an alternative ownership control structure of corporate governance on firm performance among government linked companied GLCs and Non -GLC in Malaysia, The study was based on a sample of firms over period from to Findings appear that there is a significant impact of government ownership on company performance after controlling for company specific characteristics such as company size, non- duality, leverage and growth.

The finding is off significant for investors and policy marketers which will serve as a guide for better investment decision. A study by Zertun and Tian investigated the effect which capital structure has had on corporate performance using a panel data sample representing of Jordanian companies during The study showed that a firms capital structure had significantly negative impact on the firms performance measures, in both the accounting and market's measures.

Hovakimian and Tehranian concluded that the importance of stock returns in studies of corporate financing choices is unrelated to target leverage and is likely to be due to the correlation between Pecking order theory and Market timing behavior theory.

This study also found that profitability has no effect on target leverage. Unprofitable firms issue equity to offset the excess leverage due to accumulated losses. Thus, this study supports the notion that firms have a target capital structure.

However, preference for internal financing and the temptation to time the market by selling new equity, when the share price is relatively high, interfere with the tendency to maintain the firm's debt ratio close to its target.

Our sample consists of Malaysian companies listed on the Bursa Malaysia main board belonging to six sectors construction, plantation, consumer product, property, property and transportation. Listed firms were then screened. These firms are observed over periods, allowing us to form a cylinder of panel data of observations. The return on equity is calculated as net profit item from the balance sheet dividing with total equity item from also the balance sheet for each of the companies and for each of the years from to Return on asset ROA is calculated as net profit item dividing by total asset and both of the items are taken from balance sheet.

Tobin Q is calculated as book value of total debts and market value of equity divided by book value of total asset and EPS is calculated as net income divided by a number of shares outstanding. The independent variables in this analysis are short term debt STD : ratio of short-term debt over total asset, long term debt LTD ; the ratio of long term debt divided by long term debt plus equity, total debt TD is the ratio of total asset minus total equity divided by total asset.

Growth is calculated as percentage of total asset. Literature uses a number of different measures of firms performance, these measure include accounting based measurement calculated from firm's financial statements such as ROA and ROE eg.

Tobin's Q measures which mixed market values with accounting values Zetun and Tian, This study uses two of common accounting based performance measures to evaluate the firms performance , ROE which computed as the ratio of net profit to total equity and ROA which computed as the ratio of net profit to total assets. Financial leverage. Similar to previous literature Abor, , Abor, , Saedi,, Ebaid, financial leverage was measured in the study by three ratios of short term debt to total assets STD , the ratio of long term debt to total asset LTD and total debt to total asset TD.

Control variable. Ramaswammy, ; Frank and Goyal, ; Jermias, , Ebaid, , suggest that the firms size may influence its performance; larger firm may have more capacity and capabilities. Therefore this study controls the differences in firm's operating environment by including the size variable in the model. Size is measured by the log of total assets of the firm and included in the model to control for effects of firm size on dependent variable.

The relationship between leverage and a firms performance was tested by the following regression models:. The relationship between leverage and a firm's performance was tested by the following regression models.

The breakdown of samples is presented in Table 1. The sample is divided into 6 sectors which are listed on the Bursa Malaysia. There are construction, consumer product, industrial product, plantation, property and trading.

Table II presents a summary of descriptive statistics of the dependent and independent variables used in the study. Descriptive statistics show mean, median, minimum, maximum, standard deviation, skewness and kurtosis.

This confirms that they are in less riskier condition and something needs to be done to encourage company to enhance their business by getting more debt to have an increase their value.

The data itself is taken from to comprise of companies listed on the Bursa Malaysia, but the age of the companies are different.

We divided the analysis into six sub sectors which are consumer product, construction, property, plantation, industrial product and trading services. For a plantation sector, growth and size have a positive relationship to the performance of the companies which measured by ROA whereas, STD and LTD have a negative significantly influenced the performance of the company.

For consumer product sector, only the total debt has significant negative relationship to firm performance. The main reason of having the negative relationship is because the company is confronting with the default risk of having higher loan.

Total debt and short term debt also have a significant negative relationship in a property sector. In this analysis, all sectors shows growth has significantly positive relationship with the performance measured by ROA. The value of adjusted R squared is slightly very low, this explains than the independent variables can't really explain the dependent variable.

TD P-value T-stat 0. LTD P-value T-stat 0. Growth P-value T-stat 0. STD P-value T-stat 0. Size P-value T-stat 0.


Following the Asian financial crisis, the Malaysian Government introduced new regulations on corporate governance, recognizing the importance of restoring market confidence. The purpose of this paper is to evaluate the impact of the implementation of these new regulations on corporate performance. Regression analysis was performed to examine factors influencing corporate performance. Ownership structure was represented by director ownership, foreign ownership and government ownership, and corporate governance was proxied by board size and independence. Corporate performance was measured by Tobin's Q.

Corporate governance is the collection of mechanisms, processes and relations used by various parties to control and to operate a corporation. Corporate governance includes the processes through which corporations' objectives are set and pursued in the context of the social, regulatory and market environment. These include monitoring the actions, policies, practices, and decisions of corporations, their agents, and affected stakeholders. Corporate governance practices can be seen [ by whom? Interest in the corporate governance practices of modern corporations, particularly in relation to accountability , increased following the high-profile collapses of a number of large corporations in —, many of which involved accounting fraud ; and then again after the financial crisis in Corporate scandals of various forms have maintained public and political interest in the regulation of corporate governance.

Efforts to improve corporate governance practices of public listed companies started as early as when the KLSE listing requirements made audit committees.

Journal of Public Administration and Governance

Journal Metrics. Various theories and empirical studies have been applied and proposed to establish and explain how corporate governance practices are related to banks financial performance. This study concerns the relationship between corporate governance variables and bank performance in Malaysia.

Google- Scholar Metrics. Toggle navigation. It is argued that the inclusion of intellectual elements into the measurement provides a long-term measurement of corporate performance. The outcome of the study shows that the emphasis on the importance of outside directors on the board by The Malaysian Code on Corporate Governance and by the requirements of Bursa Malaysia is deemed pertinent to the long-term corporate performance.

Abstract The paper investigates the relationship between capital structure and firm performance. The investigation has been performed using panel data procedure for a sample of Malaysian listed companies on the Bursa Malaysia Stock exchange during The study uses four performance measures including return on equity, return on asset, Tobin s Q and earning per share as dependent variable.

Corporate governance

Journal of Social and Administrative Sciences

All Rights Reserved. The purpose of this study is to examine the relationship between corporate governance and non-technology firm performance. The empirical data on 14 public listed companies PLCs in Malaysia that is observed for year The data was analyzed by using the simple linear and hierarchical regression analysis.

Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. DOI: It was subsequently revised in following the Enron and Transmile debacles. In , the SC issued the latest MCCG which introduced several new recommendations that are in line with developments in other parts of the world.

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