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Corporate governance, transparency and performance of Malaysian companies

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  • Mohd Hassan Che Haat
  • Rashidah Abdul Rahman
  • Sakthi Mahenthiran
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    Abstract

    Purpose – The paper aims to examine the effect of good corporate governance practices on corporate transparency and performance of Malaysian listed companies. Design/methodology/approach – Samples were selected using matched-sampling method and hierarchical regression was employed to test the relationship between among corporate governance mechanism, transparency and performance. Findings – Corporate governance factors have a strong predicting power on company performance, mainly due to debt monitoring and foreign ownership. However, there is a significant negative relation between audit quality and performance. The results find that performance is not associated with the level of disclosure and timely reporting. The results indicate that disclosure and timeliness are not significant contributing factors in the relationship between corporate governance and market performance. Research limitations/implications – The data covers a one-year period of 2002 only. This paper deals only with “one-way” causality running from corporate governance mechanisms to performance, even though, there is evidence of “reverse-way” and “two-way” causality in governance literature. Practical implications – This paper indicates that internal governance mechanisms are not important determinants to corporate performance. However, governance in forms of debt monitoring and foreign ownership have significant influence on corporate performance. Transparency (i.e. disclosure and timeliness of reporting) is not a significant mediating variable between corporate governance and performance. Originality/value – Distinct from previous empirical research as the disclosure level is measured using self-designed corporate governance index. Apart from a study conducted in an Asian setting of Malaysia, the study also tests transparency as a mediating variable between corporate governance and performance

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Managerial Auditing Journal.

    Volume (Year): 23 (2008)
    Issue (Month): 8 (September)
    Pages: 744-778

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    Handle: RePEc:eme:majpps:v:23:y:2008:i:8:p:744-778

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    Related research

    Keywords: Business performance; Corporate governance; Malaysia; Shareholder value analysis;

    References

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    Citations

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    Cited by:
    1. Duh, Rong-Ruey & Lee, Wen-Chih & Lin, Ching-Chieh, 2009. "Reversing an impairment loss and earnings management: The role of corporate governance," The International Journal of Accounting, Elsevier, vol. 44(2), pages 113-137, June.
    2. Kogilavani Apadore & Siti Subaryani Binti Zainol, 2014. "Determinants of Corporate Governance and Corporate Performance among Consumer Product Industry in Malaysia: A Theoretical Model," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 159-165, April.
    3. Mustaruddin Saleh & Norhayah Zulkifli & Rusnah Muhamad, 2010. "Corporate social responsibility disclosure and its relation on institutional ownership: Evidence from public listed companies in Malaysia," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(6), pages 591-613, July.
    4. Hussein A. Hassan Al-Tamimi, 2012. "The effects of corporate governance on performance and financial distress: The experience of UAE national banks," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 20(2), pages 169-181, May.
    5. Giulio Greco, 2011. "Determinants of board and audit committee meeting frequency: Evidence from Italian companies," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(3), pages 208-229, March.
    6. Siti Sakinah Azizan & Rashid Ameer, 2012. "Shareholder activism in family-controlled firms in Malaysia," Managerial Auditing Journal, Emerald Group Publishing, vol. 27(8), pages 774-794.
    7. repec:rej:journl:v:16:y:2013:i:47:p:127-146 is not listed on IDEAS
    8. Mohd Azmi Mohd Noor Author_Email: mnmazmi@ tm.com.my & Dr. Faudziah Hanim Bt Fadzil, 2011. "Influence Of Corporate Governance Attributes On Firms’ Financial Performance In Malaysia," Annual Summit on Business and Entrepreneurial Studies (ASBES 2011) Proceeding 2011-039-124, Conference Master Resources.

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