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Full Length Research Paper
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Board independence and
corporate performance: Evidence from Malaysia
C. H. Ponnu* and R. M.
Karthigeyan
University of Malaya, Kuala Lumpur, Malaysia
*Corresponding author. E-mail:
cyrilh@um.edu.my.
Accepted 18 February, 2010 |
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Abstract |
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One of the key provisions of the Malaysian Code on Corporate
Governance is the requirement for inclusion of outside or
independent directors on the board. The recent corporate
scandals that have rocked the nation provide evidence of the
failure of this provision to prevent these scandals from
occurring. Though the Malaysian Code on Corporate Governance has
been in place since 2000, it raises the question of the
appropriateness of the provision as a bulwark against corporate
misdeeds. The code is based on the United Kingdom’s experience
as set out in the Cadbury Report. Could a code based on the
Anglo-Saxon experience suit the need of this country’s business
environment? This research, thus, addresses empirically, the
effectiveness of the provision for outside or independent
directors as provided for in the Malaysian Code of Corporate
Governance on the governance of Malaysian firms. The analysis
was performed by monitoring the changes in corporate performance
with the inclusion of these outside directors. The sample for
this study comprises of firms listed on Bursa Malaysia (formerly
known as Kuala Lumpur Stock Exchange) for the year ending 2006.
Results show that there is no convincing evidence that the
provisions as outlined in Malaysian Code of Corporate Governance
as regards outside directors have any positive effect on
corporate performance.
Key words:
Independent director, corporate performance, corporate
governance, Malaysia. |
