Board composition, CEO duality and performance among Malaysian listed companies

Board composition, CEO duality and performance among Malaysian listed companies This study investigates the roles of board independence and CEO duality on a firm’s performance relying on financial ratios, namely ROA, ROE, EPS and profit margin. This paper argues that if boards and leadership structure are well in place and conform to the practices in other developed countries, the long‐term shareholder value is expected to increase and shareholder interests are also well protected. To test the roles of board independence and CEO duality, data from the KLSE Main Board companies for the 1994‐1996 financial years were used. The 1994‐1996 financial years were chosen because, during this period, the issue of corporate governance in Malaysia was not as prominent as it was during, and after, the 1997/1998 financial crisis. Thus, this period could be considered as the period during which guidelines on the structure of the board of directors were not yet available in Malaysia. The findings, generally, suggest that neither board independence, leadership structure nor the joint effects of these two showed any relations with firm performance. Findings of this study, nonetheless, showed that Malaysian companies’ boards were generally dominated by outside directors and the majority of the companies in the study practiced non‐dual leadership structures. Thus, this evidence suggests that the structure of the boards of directors in Malaysia is largely independent of management and the absence of any dominant personality. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Emerald Publishing

Board composition, CEO duality and performance among Malaysian listed companies

Corporate Governance, Volume 4 (4): 15 – Dec 1, 2004

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Publisher
Emerald Publishing
Copyright
Copyright © 2004 Emerald Group Publishing Limited. All rights reserved.
ISSN
1472-0701
DOI
10.1108/14720700410558871
Publisher site
See Article on Publisher Site

Abstract

This study investigates the roles of board independence and CEO duality on a firm’s performance relying on financial ratios, namely ROA, ROE, EPS and profit margin. This paper argues that if boards and leadership structure are well in place and conform to the practices in other developed countries, the long‐term shareholder value is expected to increase and shareholder interests are also well protected. To test the roles of board independence and CEO duality, data from the KLSE Main Board companies for the 1994‐1996 financial years were used. The 1994‐1996 financial years were chosen because, during this period, the issue of corporate governance in Malaysia was not as prominent as it was during, and after, the 1997/1998 financial crisis. Thus, this period could be considered as the period during which guidelines on the structure of the board of directors were not yet available in Malaysia. The findings, generally, suggest that neither board independence, leadership structure nor the joint effects of these two showed any relations with firm performance. Findings of this study, nonetheless, showed that Malaysian companies’ boards were generally dominated by outside directors and the majority of the companies in the study practiced non‐dual leadership structures. Thus, this evidence suggests that the structure of the boards of directors in Malaysia is largely independent of management and the absence of any dominant personality.

Journal

Corporate GovernanceEmerald Publishing

Published: Dec 1, 2004

Keywords: Corporate governance; Boards of directors; Chief executives

References

  • Ownership structure, board composition and the adoption of charter takeover procedures
    Bradbury, M.E.; Mak, Y.T.
  • Leadership structure: separating the CEO and chairman of the board
    Brickley, J.A.; Coles, J.L.; Jarrell, G.
  • Corporate board size, composition and corporate failures in retailing industry
    Chaganti, R.S.; Maharajan, V.; Sharma, S.
  • Financial distress and corporate governance: an empirical analysis
    Elloumi, F.; Gueyie, J.
  • CEO retention, firm performance and corporate governance
    Fizel, J.L.; Louie, K.K.T.
  • Corporate takeovers, firm performance, and board composition
    Kini, O.; Kracaw, W.; Mian, S.
  • CEO duality and organizational performance: a longitudinal analysis
    Rechner, P.L.; Dalton, D.R.
  • Higher market valuation of companies with a small board of directors
    Yermack, D.

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