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Corporate governance structure and firm performance : empirical evidence from Brusa Malaysia, Kuala Lumper

journal contribution
posted on 2005-09-01, 00:00 authored by Huson Ali Ahmed, M Ali
The issue of corporate governance has been emerging as important phenomena that has been searched extensively both in developed countries due to its strategic impact on the monitoring of management activities and firms’ performance. Yet little attempt has been made in developing countries like Malaysia to ascertain what constitute corporate governance and its impact on firm's performance. Therefore, this study aims at examining the structure of the corporate governance and its impact on firm’s performance. This study is based on 100 firms, which are the component of the Composite Index (CI) serve as market barometer. This study employs cross-sectional annual multiple regression model to examine, what constitutes the corporate governance structure and its impact on performance of the firm. The analysis was based on annual regression over 5 years period from 1997 through 2001. Three different blend of surrogate for corporate governance were developed for good corporate governance structure. These are the independent non-executive (outside) directors, audit committee and remuneration committee. To isolate the size effect from the impact of corporate governance structure on firm’s performance, firm’s size was also included are variable in the model. The ratio of net income before tax to total asset is used as a surrogate for firm’s performance. Evidence from the study indicates that there is partial relation between corporate governance structure and corporate performance. The presence of both audit and remuneration committee serves as an important monitoring device to control management activities that lead to increase firm's performance. While on average, the presence of independent nonexecutive directors does not provide any significant explanation for the firm's performance. However, the firm size appears to have significant impact on corporate performance.

History

Journal

International business & economics research journal

Volume

4

Issue

9

Pagination

59 - 66

Publisher

Clute Institute for Academic Research

Location

Littleton, Colo.

ISSN

1535-0754

eISSN

2157-9393

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Copyright notice

2005, Clute Institute for Academic Research

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