The Mechanisms of Corporate Governance and Firm Performance: Evidence from Malaysia’s ACE Market
Abstract
Corporate governance is pivotal for company performance, but Malaysian companies are not necessarily confident in their system. For companies on the ACE Market where the degree of adoption for MCCG is lower, the threat of delisting grows greater. This study, by using firm performances as measured by ROA and Tobin's Q, sought to answer whether there is an association between company return on assets (ROA) and Tobin's with the effect of these corporate governance mechanisms. This study using a sample of 103 listed companies in the ACE Market, our study obtained diversified metrics of governance effect on firm performance through OLS during the regression analysis process. Risk management committees and CEO duality had negative impacts on ROA; but their impacts were minor in relation to Tobbins Q. The size of the board and firm age both had a positive effect on ROA; however, the default rate decreased with frequency of board meetings. Our results are consistent with the relational complexity of governance–performance phenomena underdeveloped. It seems that a one-size-fits-all categorical endorsement may not have any impact. The study provides practical implications to the literature for policy decision makers, managers of firms across countries (especially in emerging economies like India, who want to improve their quality of transparency and accountability) and investors.
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