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The Effect of Board Composition on the Efficiency of Public Listed Companies in Malaysia

Author

Listed:
  • Chee-keong Choong

    (Universiti Tunku Abdul Rahman)

  • Sok-gee Chan

    (University of Malaya)

  • Chuen-khee Pek

    (The University of Nottingham Malaysia Campus)

Abstract

Using data from 2005 to 2010, we investigate the effects of board composition, especially by qualification of directors and role of independent directors, on the efficiency for Malaysia in balanced panel consisting of top 100 public listed companies and 582 observations. Using Data Envelopment Analysis (DEA), we calculate technical efficiency by taking into account of both time and firm effects directly. We conclude that the top 100 public listed companies are relatively less efficient in utilizing their inputs in terms of labor and capital in achieving a given level of output which is measured by the amount of sales revenues. In Tobit regressions, we investigate effect of board compositions on the firm's efficiency level for both cost and profit. With respect to the effect of board compositions, we find that number of independent directors is positively and statistically significant to increase firm efficiency while board size does not significantly influence the firms' performance.

Suggested Citation

  • Chee-keong Choong & Sok-gee Chan & Chuen-khee Pek, 2016. "The Effect of Board Composition on the Efficiency of Public Listed Companies in Malaysia," Economics Bulletin, AccessEcon, vol. 36(3), pages 1354-1363.
  • Handle: RePEc:ebl:ecbull:eb-14-00095
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    References listed on IDEAS

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    Cited by:

    1. Hafezali Iqbal Hussain & Azlan Ali & Hassanudin Mohd Thas Thaker & Mohsin Ali, 2019. "Firm Performance and Family Related Directors: Empirical Evidence from an Emerging Market," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(2), June.

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    More about this item

    Keywords

    Global financial crisis; bank efficiency; firms' performance; board size and board structure;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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