Corporate governance attributes and firm’s value

Abstract

Contemporary corporate scandals and the East Asian financial crisis, other than the latest worldwide economic recession, are the consequence of incompetent corporate governance structures. This is contributed by lack of sound corporate governance due to separation of ownership and control that causes agency problems in the firms. In agency theory, the managers are expected to engage in their own pursuit instead of the shareholders’ interest. This happens as shareholders are usually dispersed, therefore affecting adversely the capabilities to monitor and control managers’ actions. It has been broadly recommended that corporate governance attributes develop suitable systems in the manner of firm’s achievement and transparency. Therefore, the purpose of this paper is to examine the firm value following the introduction of Malaysian Code of Corporate Governance 2012 recommendations and to analyse the relationship between corporate governance attributes and firm value using the agency theory. The corporate governance attributes examined were: board size, outside directors, CEO duality and managerial ownership. The samples were taken from the top 100 public listed firms on Bursa Malaysia based on their market capitalization. The findings reveal that the CEO duality and managerial ownership are significantly associated with the firm value. The findings may help policy makers to formulate future effective code of best practice for firm’s value enhancement.