Internal corporate governance and board performance in monitoring roles Evidence from Malaysia

Internal corporate governance and board performance in monitoring roles Evidence from Malaysia Purpose – This paper aims to examine the relationship between internal corporate governance mechanisms and board performance in monitoring roles. Design/methodology/approach – A survey questionnaire was used to gather data on board performance, while annual reports were employed to gather data on internal corporate governance mechanisms. Data for board performance were based on 112 directors who represent the companies. Findings – Factor analysis extracted two dimensions of monitoring roles: management oversight roles and performance evaluation roles. Non‐independent non‐executive directors and managerial ownership were found to be positively related to both dimensions of monitoring roles, while the multiple directorships of non‐executive directors were negatively related to management oversight roles. Practical implications – The paper establishes the need for regulators to pay particular attention to multiple directorships, which are commonly practiced in public listed companies. The contribution of non‐independent non‐executive directors rather than independent directors in monitoring roles calls for further research. Regulators need to emphasize the performance evaluation roles of the board of directors (BOD), as much emphasis has been given to management oversight roles. Originality/value – The study contributes to the literature concerning monitoring roles as it shows that management oversight roles and performance evaluation roles are differentiated. The findings provide an avenue for the contribution of non‐independent non‐executive directors and multiple directorships in monitoring roles. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Reporting and Accounting Emerald Publishing

Internal corporate governance and board performance in monitoring roles Evidence from Malaysia

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1985-2517
DOI
10.1108/19852511111173095
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to examine the relationship between internal corporate governance mechanisms and board performance in monitoring roles. Design/methodology/approach – A survey questionnaire was used to gather data on board performance, while annual reports were employed to gather data on internal corporate governance mechanisms. Data for board performance were based on 112 directors who represent the companies. Findings – Factor analysis extracted two dimensions of monitoring roles: management oversight roles and performance evaluation roles. Non‐independent non‐executive directors and managerial ownership were found to be positively related to both dimensions of monitoring roles, while the multiple directorships of non‐executive directors were negatively related to management oversight roles. Practical implications – The paper establishes the need for regulators to pay particular attention to multiple directorships, which are commonly practiced in public listed companies. The contribution of non‐independent non‐executive directors rather than independent directors in monitoring roles calls for further research. Regulators need to emphasize the performance evaluation roles of the board of directors (BOD), as much emphasis has been given to management oversight roles. Originality/value – The study contributes to the literature concerning monitoring roles as it shows that management oversight roles and performance evaluation roles are differentiated. The findings provide an avenue for the contribution of non‐independent non‐executive directors and multiple directorships in monitoring roles.

Journal

Journal of Financial Reporting and AccountingEmerald Publishing

Published: Oct 25, 2011

Keywords: Non‐independent non‐executive directors; Managerial ownership; Multiple directorships; Board performance; Monitoring roles; Boards of directors; Malaysia

References

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