You are on page 1of 107

Corporate Governance and Financial Performance

(A Study of Malaysian Listed Companies)

Amir Ranjbar
CGA070054

Supervisor:
Dr. Cyril Hilaris Ponnu

University Malaya
03/05/2009

Submitted to the Graduate School of Business Faculty of Business


and Accountancy University of Malaya, in partial fulfillment of the
requirements for the degree of Master of Business Administration
June 03, 2009

Acknowledgement

To my best friend and wife who always was, is, and would
be my best support.

To my parents who always encourage and influence me in


all aspects of my life.

I am also very grateful to my supervisor and lecturer who


have provided clues, reviews as well as critical comments
and suggestions to improve my work.

Table of Contents
Acknowledgement ............................................................................................................. 2
List of Tables .................................................................................................................... 6
List of Figures ................................................................................................................... 7
Abstract ............................................................................................................................. 8
1. Introduction................................................................................................................. 10
1.1. Background of the Problem ................................................................................. 11
1.2. Problem Statement ............................................................................................... 13
1.3. Objectives of the Study ........................................................................................ 13
1.4. Summary and Organization of the Remaining Chapters ..................................... 15
2. Literature Review ....................................................................................................... 18
2.1. Corporate Governance in Malaysia ..................................................................... 18
2.2. The Malaysian Legal, Regulatory and Institutional Structure ............................. 18
2.3. Formation of New Governing Bodies.................................................................. 25
2.4. Corporate Governance, Ownership and Performance ......................................... 26
2.5. Corporate Ownership and Control in Malaysia ................................................... 28
2.6. Corporate Governance and Dividend Policies ..................................................... 29
2.7. Does Board Composition Affect The Firm Performance? .................................. 31

2.8. Does Firm Performance Affect Board Composition? ......................................... 34


2.9. Why Board Composition Has Become a Hot Issue in Malaysia? ....................... 35
2.10. CEOChairman Duality..................................................................................... 37
3. Methodology ............................................................................................................... 38
3.1. Determinants of Financial Status of Companies ................................................. 38
3.2. Determinants of Corporate Governance .............................................................. 40
3.2.1. TDI Board Sub-Indexs Notes ...................................................................... 43
3.2.2. TDI Disclosure Sub-Indexs Notes ............................................................... 44
3.2.3. TDI Shareholder Sub-Indexs Notes ............................................................ 49
3.3. Controlling Variables........................................................................................... 51
3.4. Sources of Data .................................................................................................... 53
3.5. Theoretical Framework and Main Research Hypotheses .................................... 55
3.6. Scope of the Study ............................................................................................... 57
4. Data Analysis and Results .......................................................................................... 59
4.1. Descriptive Analysis ............................................................................................ 59
4.2. Correlation between Independent Variables ........................................................ 62
4.3. Regression Analysis............................................................................................. 63
4.4. Regression Results ............................................................................................... 74
5. Conclusion .................................................................................................................. 75

6. References................................................................................................................... 78
Appendix A: Financial Status of Companies (Dependent Variables) ............................ 81
Appendix B: Financial Status of Company (Independent Variables) ............................ 87
Appendix C: Management and Ownership of Company ................................................ 93
Appendix D: TDI, TDI-Board, TDI-Disclosure, and TDI-Shareholders ..................... 100

List of Tables
Table 1: Descriptions of La Porta's Factors .................................................................... 20
Table 2: Comparison of Legal Protection and Accounting Standards in various
Countries. ........................................................................................................................ 24
Table 3: Structure of the Transparency and Disclosure Index (TDI). ............................ 41
Table 4: Estimation of effect of Independent Variables on Dependent Variables ......... 57
Table 5: Descriptive Data for Management and Ownership Data .................................. 59
Table 6: Dependent Variables Descriptive Analysis ...................................................... 61
Table 7: Corporate Governance and Ownership Correlation Matrix ............................. 62
Table 8: ROA as Dependent Variable ............................................................................ 63
Table 9: Tobins as Dependent Variable ........................................................................ 64
Table 10: Dividend/Earning as Dependent Variable ...................................................... 65
Table 11: Dividend/Sales as Dependent Variable .......................................................... 66
Table 12: Altman's Z-Score as Dependent Variable....................................................... 67
Table 13: Dept/Assets as Dependent Variable ............................................................... 68
Table 14: Debt/Equity as Dependent Variable ............................................................... 68
Table 15: ROA as Dependent Variable .......................................................................... 70
Table 16: Tobin's Q as Dependent Variable ................................................................... 71
Table 17: Dividend /Earning as Dependent Variable ..................................................... 71
Table 18: Dividend / Sale as Dependent Variable .......................................................... 72
Table 19: Altman's Z-Score as Dependent Variable....................................................... 72
Table 20: Debt / Assets as Dependent Variable ............................................................. 73

Table 21: Debt / Equity as Dependent Variable ............................................................. 73


Table 22: Regression Summary ...................................................................................... 74

List of Figures
Figure 1: Theoretical Framework ................................................................................... 56

Abstract
The existing studies often find statistically controversial effects of corporate
governance and ownership on firm financial performance in developed countries.
Unfortunately, there are rare empirical studies on emerging markets while they often
show wider variations in corporate governance practices, which may have an impact
on firm performance and dividend policy.

A good example in this field is Malaysia. After independence in 1957, Malaysia has
faced many challenges such as riots in 1969 and financial crises in 1997. These
factors caused many reforms in corporate ownership and governance rules in this
country. This study wants to find out how corporate governance and ownership can
affect performance of Malaysian listed companies. This study is important and new in
two ways. First, Malaysia is a fast developing country and in order to accelerate their
progress and avoid any interruption, they tried to accept best practices in corporate
governance during last decade. We want to examine the effect of these changes on
reality and on the performance of Malaysian listed companies. Second, there is no
similar research in Malaysia in this area. The result of this research can help to see the
real effect of Bursa Malaysia policies to regulate market and since this research is
quantitative, its results can illustrate to what degree corporate governance rules and
regulations were successful in Malaysia.

The data used in this research are secondary data gathered from listed companies in
main and second Bursa Malaysia boards. By regression analysis, we tried to find out
to what extent corporate governance is acting successfully.

The results of this study reveal that corporate governance has a positive effect on
Tobins Q, Dividend/Sales, Debt/Assets, and Debt/Equity of company. Also a
narrower bound of corporate governance like TDI Disclosure or Shareholders have
positive effect on Return on Assets (ROA) or TDI disclosure can increase Altmans
Z-Score which means by increasing the transparency of board activities, firms can
reduce their risks.

Keywords: Corporate Governance, Financial Performance, Board Independence, CEO


duality, Board Balance, and Ownership.

1. Introduction
Among Asian companies, corporate governance is often regarded as a weak link to
performance. The board of directors is amongst the internal governance mechanisms
intended to ensure that the interests of managers are in line with shareholders interest,
and to discipline or remove ineffective management teams. Most studies have tackled
the issues of corporate governance separately. There are many researches which
targeted the effect of CEO duality, Board Size, Board Balance, Ownership, and Board
Dedication on Firms Performance. Unfortunately, most empirical researches on these
issues have been restricted to US data. The generalizability of such findings may not
extend across national boundaries due to different regulatory and economic
environments, cultural differences, the size of capital markets and the effectiveness of
governance mechanisms.

This study tries to observe the effect of corporate governance and ownership of 100
Malaysian listed companies on their financial performance in 2007. Malaysia has one
of the most developed stock markets in the ASEAN region. This study includes 100
public listed companies in Bursa Malaysia from FTSE BM 30, FTSE BM 70, FTSE
BM Small Cap Index, FTSE BM Second Board, and FTSE BM MESDAQ which
almost covers one seventh of all listed companies in Bursa Malaysia. The extracted
data are from financial data of companies in year 2007.

This study hypothesizes that well-defined policies and regulations which is defined as
listing requirement in Bursa Malaysia can increase the performance of companies.
The results of this study support the above hypothesis and illustrate that there is a
positive relationship between well-management and transparency on one hand, and
high financial performance on the other hand.

1.1. Background of the Problem


The failure of organizations which were previously thought to be infallible such as
Enron and WorldCom in the USA, Ansett, OneTel and HIH in Australia have had
investors and other stakeholders demanding better corporate governance, especially
by means of cleaning up the boardroom (Cheng, 2003; Houle, 1990; Park and Shin,
2003). Malaysian Code of Corporate Governance stipulates that at least one third of
the board of directors must consist of independent directors. The code was adopted in
response to the East Asian financial crisis, calling for among others, greater
transparency and good governance.

The positive effect of the crisis then, in improving corporate governance practices was
also seen by the Second Finance Minister, Mustapa Mohamad. In his own words:
The East Asian crisis poses a multitude of challenges. The biggest challenge ahead
for the country is to resume its drive towards development, to resume growth. In
restoring growth, an industrializing nation such as Malaysia, must have a clear

process in place. This process includes sound regulation of markets, including good
corporate governance practices which will aid to bring about greater depth and
resilience to the Malaysian economy. What I would classify as a positive feature of
the crisis, is the sense of urgency with which issues of corporate governance are
being addressed. Throughout the world, corporate governance reforms have arisen
from local crises. East Asia is no different (Treasury, 199).
Mustapa was also quick not to conclude that better corporate governance practices as
the silver bullet, while at the same acknowledged its importance.

Malaysia passed many reforms in corporate ownership and governance rules.


Financial Sector Master Plan (FSMP) which provided by ministry of Finance in 2001,
Capital Market Master Plan by securities commissions in 2001, or recommendations
by Finance Committee on Good Governance (FCGG) which are the reaction to 1997
crises are just some samples of these reforms.

Now, it is important to quantitatively inspecting the results of all these reforms on the
performance of firms. By this mean, it is possible to make sure that the efforts in this
field were necessary and they have done in the correct way.

1.2. Problem Statement


Although Ministry of Finance, securities commissions and all other related
organizations have tried to adopt best practices of corporate governance and
ownership in Malaysia, there is no practical study to observe the real relationship
between these two items. Each country has its own specific culture and it is difficult
to say that best practices in other countries, which have proven, will result in the same
way in other countries. The result of a quantitative study can reveal that to what extent
these efforts were successful or on the other hand were unnecessary or unrelated. It
also can show the required changes or improvements in policies and regulations.

1.3. Objectives of the Study


The goal of this research is twofold. First, it gathers, for the first time, quantitative
measures of the quality of the corporate governance and the ownership structure of
100 non-financial listed companies in Malaysia with information for 2007. A wide
array of official and private sources was used for this research. In a nutshell,
companies seem to be following international practices and code of corporate
governance. In turn, ownership appears to be quite concentrated at the level of the
largest ultimate shareholder, with pyramiding being the main mechanism for creating
such a wedge. Second, we test the predictions of recent theories linking those
measures with corporate performance, capital structure, and dividend policy.

This study can show the strengths and weaknesses of rules and regulations in financial
market in Malaysia. To measure the financial status of the companies, this study
divides them into the following categories:

Profitability which is measured by:


o Return on Assets (ROA)
o Tobins Q
o Dividend to Earning
o Dividend to Sales

Risk is measured by:


o Altmans Z-score

Capital Structure which is measured by:


o Debt to Assets
o Debt to Equities

To gauge the strength of corporate governance practices, this study employs


Transparency Disclosure Index (TDI) in listed companies. The TDI is based on public
information and reflects the norms of transparency and disclosure in a company. The
TDI is composed of 25 binary items, which cover a broad range of corporate
governance topics. The binary item equals one if a company follows one of the
corporate governance standards and zero otherwise. The TDI consists of three subindices:

Board which measures the structure, procedures and compensation of board


and top management members.

Disclosure which measures the degree to which the company reports relevant
corporate facts to the outside stakeholders.

Shareholders which measures the quality of information regarding


compensation to minority shareholders.

To consider the ownership and other related factors, the following controls items also
added to the final regression:

Size of the companies as total capital market

Ownership factor (it is 0 if the company is widely held otherwise 1)

CEO Duality (whether CEO and Chairman of the board are the same person)

Sector dummy variable

1.4. Summary and Organization of the Remaining Chapters


This study examines the relation between corporate governance practices measured by
the Transparency Disclosure Index (TDI) and corporate performance among
Malaysian listed companies. This empirical approach lies in constructing measures of
the quality of the corporate governance for 100 non-financial and non-utility
companies listed on the Bursa Malaysia in financial year 2007.

The result of this research finds evidence that better TDI grades leads to an increase in
the Tobins Q, Dividend/Sales, and leverage of company. Also higher ranks in TDI
sub-indices such as Disclosure and Shareholders have positive effect on ROA and
Altmans Z-score.

The next chapter is a complete literature review about corporate governance


especially in Malaysia and its relation to financial status and performance of
company. This chapter covers this issue from different angles such as Regulations,
Institutional Structure, Governing Bodies, and Ownership and its relation to
Performance. Also this chapter looks at the effect of Corporate Governance, Board
Composition and CEO Duality on Dividend Payment and other Financial
Performance of firms.

Chapter 3 describes the analysis methodology, structure of data sample and the ways
and sources from which the data were gathered. This chapter briefly explains the
meaning of each variable and why they have been chosen as a variable in the data set.

In chapter 4, shows the Regression analysis and its results. At first section of this
chapter, there three tables which show the descriptive analysis and the correlation
between Independent Variables. After that, there is an introduction of equations which
have been used and the relationship between estimators and regressors. The results
have been shown as regression table results beside the interpretation of each table. At

last there is a table which gathered all the results of all fourteen regression equations.
Chapter 5 is the conclusion and has some points for further studies. And the last
chapter includes the references we use in this research.
There four appendices which show Dependent Variable, Independent Variable and
Management and Ownership data which are used in analysis.

2. Literature Review
2.1. Corporate Governance in Malaysia
Before 1997/1998 Asian financial crisis, corporate governance practices in Malaysia
were not important and a matter of concern according to many international bodies, in
particular when the World Bank concluded that East Asian countries had the basics
right in terms of economic management, and effective public institutions and
governance (refer to World Bank, 1993). After 1997/1998 economic crisis in most
East Asian countries, especially South Korea, Thailand, Malaysia and Indonesia, this
view changed rapidly. Corporate governance came to be seen as a problem with a
range of international agencies such as the World Bank, International Monetary Fund
(IMF), Asian Development Bank (ADB) and the Malaysian government tried to do
reforms in corporate governance practices as a way of managing the financial crisis.

2.2. The Malaysian Legal, Regulatory and Institutional Structure


So many regulations, laws, non-legal requirements and codes of conduct have been
introduced over the past four decades in Malaysia as guidance for company directors
in the performance of their duties and responsibilities. The three main acts that govern
the Malaysian nonfinancial corporate sector activities today are:

Companies Act (CA) 1965

Securities Industry Act (SIA) 1983

Securities Commission Act (SCA) 1993

The CA 1965 deals with the pre-incorporation, incorporation, operations and duties of
companies and their directors, as well as the rights and obligations of shareholders
and directors.

The Policies and Guidelines on Issue/Offer of Securities Commission (SC) and the
listing requirements of the Malaysian stock exchange also play an important role in
regulating directors, investors, brokers and issuers.

The SIA 1983 and SCA 1993 make up the legislative and regulatory framework of
Malaysias capital markets, under the authority of the Ministry of Finance. Under
Malaysian law, company directors are primarily responsible for the governance of
their companies, and the shareholders role in governance is to appoint the directors
and external auditors in order to satisfy themselves, among other things, that an
appropriate governance structure is in place. The shareholders have access to regular
information, can call for emergency shareholder meetings and make proposals at
shareholder meetings. The law protects shareholders by:
1. Stipulating regulations governing the duties of company directors
2. Requiring AGM approval for the acquisition or disposal by directors of assets
of substantial value, and for the issue of shares

3. Prohibiting loans to directors or director-related parties, unless they are


subsidiaries
4. Disclosing and requiring shareholders approval on substantial transactions in
any non-cash assets involving directors or persons connected with directors
5. Disclosing substantial shareholdings to the company and the Malaysian stock
exchange

Based on the data provided by La Porta et al. (1998), it is evident that Malaysia has
acceptable level of shareholder and creditor rights in comparison to other neighbors or
developed countries. But there are some gaps in Rule of Law, Corruption, and Risk of
Expropriation which governors in Malaysia should try to close them by adding more
precision in Corporate Law.

The following table describes the factors La Porta et al. (1998) used in their research.

Table 1: Descriptions of La Porta's Factors

Factor

Description

One-Share One- Equals one if the company law or commercial code of the
Vote

country requires the ordinary share carry one vote per share, and
zero otherwise. This law prohibit multi-voting or non-voting.

Anti-director

An aggregate index between 0-6. The following conditions add 1

Right

point to this aggregate: 1. Mail shareholders proxy vote 2. No

requirement to deposit shares before Annual General meeting 3.


Allowance of cumulative or proportional voting 4. Availability
of oppressed minorities mechanism 5. The minimum 10% of
total equity requirement to attend extraordinary shareholder
meeting 6. Shareholders have preemptive rights that can only be
waived by a shareholders vote.
Creditors Right

An index aggregating creditors right. It measures four powers


of secured lenders in bankruptcy. The first measure is whether
secured creditors are able to seize their collateral once a
reorganization petition is approved, in other words, whether the
court imposes an automatic stay on assets. The second
measure is whether restrictions such as creditor consent must be
observed when a borrower files for reorganization, as opposed to
debtors seeking unilateral protection from creditors claims by
filing for rehabilitation. The third measure is whether secured
creditors are paid first out of the proceeds of liquidating a
bankrupt firm or if third-party claims take priority. The final
measure is whether creditors or an administrator is responsible
for running the business during reorganization, rather than
having the debtor continue to run the business.

Efficiency of

This is an assessment of the efficiency and integrity of the legal

Judicial System

environment as it affects business, particularly foreign firms


produced by the country risk rating agency, International
Country Risk (ICR).

Rule of Law

This is an index of the law and order tradition of the country and
is scaled from zero to ten with higher scores for countries with
stronger traditions for law and order. The rule of law index
reflects the degree to which the citizens of a country are willing
to accept the established institutions to make and implement
laws and adjudicate disputes. Higher scores indicate sound
political institutions, a strong court system, and provisions for an
orderly succession of power. Lower scores indicate depending
on physical force or illegal means to settle scores. Upon
changes in government, new leaders may be less likely to accept
the obligations of the previous regime.

Corruption

ICRs assessment on the corruption of the government. Lower


scores indicate that high government officials are likely to
demand special payments and illegal payments are generally
expected throughout lower levels of government in the form of
bribes connected with import and export licenses, exchange
controls, tax assessments, policy protection, or loans. Scale
from zero to ten with lower scores for higher levels of

corruption.
Risk of

ICRs assessment of the risk of outright confiscation or

expropriation

forced nationalization. Scale zero to ten, with lower scores for


higher risks.

Accounting

Index created by examining and rating companies 1990 annual

Standards

reports on their inclusion or omission of 90 items. These items


fall into seven categories (general information, income
statements, balance sheets, fund flow statement, account
standards, stock data, and special items).

Table 2 shows a comparison of Efficiency of Judicial System, Rule of Law,


Corruption, Risk of Expropriation, Accounting Rating, Creditors Right, One-share
One-Vote, and Anti-director Right between Malaysia and ten other countries.

8.52

9.27

75

Canada

9.25

10.00

10.00

9.67

74

Hong Kong

10.00

10.00

10.00

9.67

69

India

8.00

4.17

4.58

7.75

57

Indonesia

2.50

3.98

2.15

7.16

Na

Malaysia

9.00

6.78

7.38

7.95

76

Singapore

10.00

8.57

8.22

9.30

78

Taiwan

6.75

8.52

6.85

9.12

65

Thailand

3.25

6.25

5.18

7.42

64

10.00

8.57

9.10

9.71

78

10.00

10.00

8.63

9.98

71

Anti-director Right

Risk of Expropriation

10.00

One Share One Vote

Corruption

10.00

Creditors Right

Rule of Law

Australia

Countries

Accounting Rating

Efficiency of Judicial System

Table 2: Comparison of Legal Protection and Accounting Standards in various Countries.

United
Kingdom
United State

2.3. Formation of New Governing Bodies


With regarding of anticipation of the implementation of a code of corporate
governance in Malaysia, the Malaysian Institute of Corporate Governance (MICG)
was incorporated under the CA1965 in March 1998. The founder members of the
MICG were the Federation of Public Listed Companies (FPLC), Malaysian Institute
of Accountants (MIA), Malaysian Institute of Directors (MID), Malaysian
Association of The Institute of Chartered Secretaries and Administrators (MAICSA)
and Malaysian Institute of Certified Public Accountants (MICPA). The MICG ran a
crusade of better governance (Shankar, 1999) to improve the corporate governance
system for the nation. Its objective was to represent, express and give effect to
opinions of members of MICG on issues relating to corporate governance
(management of the business and affairs of corporations) in Malaysia and promote
awareness of corporate governance principles among corporate participants, the
investing public and corporations, stressing the importance of good governance in
enhancing long-term shareholder value and the financial viability of business.

At the same time, the government set up the High Level Finance Committee on
Corporate Governance (HLFC) to establish a framework for corporate governance
and set best practices in Malaysia. The HLFC was a partnership effort between the
government and the private sector to enhance the standards of corporate governance
in Malaysia.

Additionally, in recognition of the need to protect minority shareholders, a monitoring


body on corporate governance was set up by the Employees Provident Fund (EPF),
the Minority Shareholders Watchdog Group (MSWG) in 2001, as a voice for minority
shareholders and to provide an avenue for minority shareholders to institute
proceedings against listed issuers who fail to comply with the principles and practices
of good corporate governance.

2.4. Corporate Governance, Ownership and Performance


During last two decades a great deal of attention has been given to finding how
corporate governance and ownership structures affect firms performance. Corporate
governance can influence a firms performance in two ways:

Whenever a conflict of interest arises between management and shareholders

Whenever a conflict of interest arises between controlling and minority


shareholders

In the management-shareholder conflict, the agency problem manifests itself in


managements low effort and unproductive investments, usually known as perquisites.
In the controlling-minority shareholder conflict, controlling shareholders use their
power to benefit themselves at the expense of the minority shareholders, in what is
called expropriation or private benefits of control.

The root of both conflicts is the fact that the manager in the first case, and the
controlling shareholders in the second case, receive only a portion of the firms net
revenue, while they fully appropriate the resources diverted. Thus, it is conceivable
that, in light of this incentive structure, insiders will maximize their utility even when
the firm as a whole will not.

Of course, the ability to fulfill these goals is conditioned on the power which insiders
have in the companys decision-making process. Managers will enjoy more power as
they are part of the board or act in connivance with the board and the controlling
shareholders. In turn, the power of controlling shareholders relies in how effectively
they can manipulate board decisions by way of voting majorities and other means;
distortionary policies will then increase as the ratio of voting to cash flow rights is
higher (see La Porta et al., 1999, and Claessens et al., 1999). Outsiders have two main
instruments to counterbalance this power: the enforcement of adequate corporate
governance standards and the quality of the regulatory and legal environment, which
should discourage detrimental actions by insiders and, once committed, allow affected
stakeholders to challenge them through corporate and judicial channels.

While a wedge between control and cash flow rights is likely to harm minority
shareholders and corporate valuation, Jensen and Meckling (1976) and Morck,
Shleifer and Vishny (1988) make the point that concentrated ownership may actually
have an ambiguous effect: on one hand, there may be a beneficial effect on

performance and valuation (the so-called incentive effect) in that higher cash flows
rights in the hands of a few shareholders tends to reduce the free riding problem
associated with dispersed ownership when it comes to monitoring and punishing
opportunistic managers; on the other hand, the negative effect (the entrenchment
effect) above mentioned may take place whenever there is high concentration of
control rights and/or separation between control and cash flow rights.

2.5. Corporate Ownership and Control in Malaysia


This mechanism is needed to explain the corporate control of certain firms at different
levels. Ownership can be elaborated by type of ownership and the ownership
concentration. The type of ownership can be further explained by individual,
institution, state, foreign, and managerial ownership. The importance of ownership
concentration was recommended by Schleifer and Vishny (1997) as one of the key
determinants of corporate governance. Large shareholders often referred as block
shareholders can benefit the minority shareholders because of their power and
incentive to prevent expropriation (Mitton, 2002).

However the controlling shareholders may follow objectives that are not aligned with
those of minority shareholders (Morck et. al, 2000 and Bebchuk et. al, 2000). Mitton
(2002) reported that a higher ownership concentration is comes with a higher stock

price return of an average of 2.6% for every increase of 10% in the ownership of the
largest shareholders.

2.6. Corporate Governance and Dividend Policies


As a pioneer, Black (1976) found no convincing explanation why companies pay cash
dividends to their shareholders. Since that introduction of the dividend puzzle, a
voluminous amount of research has offered alternative and appealing approaches to
solve it.

Most of them are rooted in information asymmetries between firm insiders and
outsiders, and suggest that firms may indicate their future profitability by paying
dividends. Grossman and Hart (1980) pointed out that dividend payouts can mitigate
agency conflicts by reducing the amount of free cash flow available to managers, who
do not necessarily act in the best interest of shareholders. Similarly, Jensen (1986)
argues that a company with substantial free cash flows is inclined to adopt investment
projects with negative net present values. If managers increase the amount of
dividends, they also reduce the amount of free cash flows, and mitigate the free cash
flow problem. Thus, dividend payouts may help control agency problems by getting
rid of the excess cash that otherwise could be spent on unprofitable projects. La Porta
et al. (2000) outline and test two agency models of dividends.

First, the outcome model suggests that dividends are paid because minority
shareholders pressure corporate insiders to disgorge cash.

Second, the substitution model predicts that firms with weak shareholder
rights need to establish a reputation for not exploiting shareholders.

Hence these companies pay dividends more generously than do firms with strong
shareholder rights. In other words, dividends substitute for minority shareholder
rights. The empirical results of La Porta et al. (2000) on a cross-section study of 4000
companies from 33 countries with different levels of minority shareholder rights
support the outcome agency model of dividends. Accordingly, it is reasonable that
outside minority shareholders prefer dividends over retained earnings. In accordance
with that, Bebczuk (2005) argues that the testable prediction of this theoretical body is
that dividend disbursements will be higher the better are the corporate governance
practices in the company. In this case, corporate governance reflects the power of
shareholders in the company.

The influence of shareholders monitoring upon dividend payouts has been


recognized in the literature. The severity of agency costs appears likely to be inversely
related to the strength of shareholder rights (Gompers et al. 2003). Companies
exposed to agency conflicts are more likely to experience a wider divergence of
ownership and control, where shareholder rights are more suppressed. Shareholder
rights are related to agency problems and also to dividend payouts.

2.7. Does Board Composition Affect The Firm Performance?


Studies of the effect of board composition on firm performance generally adopt one of
two approaches. The first approach involves studying how board composition affects
the boards behavior on discrete tasks, such as replacing the CEO, or acquiring
another firm and the like whereas, the second approach directly examines the
relationship between board composition and firm performance in which in our study
has been one of the major concerns. Overall correlation between board composition
and firm performance involves studying whether board composition affects overall
firm performance. This approach allows us to examine the bottom line of firm
performance but involves much less traceable data. Firm performance must be
measured over a long periods which means that performance measures are noisy and
perhaps mis-specified.

Prior research does not support a clear correlation between board independence and
firm performance. For example, early work by Vance reports a positive correlation
between the proportion of inside directors and a number of performance measures.
Baysinger and Butler (1985), Hermalin and Weisbach (1988), and MacAvoy and
coauthors (1983) all report no significant same year correlation between board
composition and various measures of corporate performance. A recent large-sample
study by Ferris and his coauthors (2006) finds no significant correlation between

proportion of outside directors in 2005 and ratio of market value to book value in
2006. An early expectation to these non-results come from Baysinger and Butler, who
report that the proportion of the independent directors in 1970 correlates with 1980
industry-adjusted return on equity. However, their ten-year lag period is very long for
any effects of board composition on performance to persist. Studies in Australia,
Singapore, and the United Kingdom also find no correlation between board
composition and firm performance.

A few studies offer hints that firms with a high percentage of independent directors
may perform worse. Yermack (1997) reports a significant negative correlation
between the proportion of independent directors and contemporaneous Tobins q
(ratio of the market value of a firms asset to the book value of its assets), but no
significant correlation for several other performance variables (sales/assets; operating
income/assets; operating income/sales). Agrawal and knoeber (1996) report a negative
correlation between the proportion of outside directors and Tobins q. Klein (2002)
reports a significant negative correlation between a measure of change in market
value of equity and proportion of independent directors, but insignificant results for
return on assets and stock market returns. Fosberg reports that majority-outside boards
have a significantly lower sales/assets ratio, but finds insignificant (although generally
negative) results for several other performance measures.

Even studies by Rosenstein and Wyatt (1990) find that stock prices increase by about
0.2% on average when a company appoints an additional outside director. This
increase, while statistically significant, is economically small and could reflect
signaling effects. Appointing and additional outside director could signal that a
company plans to address its business problem, even if board composition doesnt
affect the companys ability to address these problems. Moreover, Rosenstein and
Wyatt (1990) find a stronger price reaction for outside directors who work for
financial institutions than for directors whose principal job is with another unrelated
non-financial corporation. Yet outside directors who work for financial institutions
are usually treated as affiliated outside directors rather than independent directors,
because their own firm may be interested in business dealings with the firm on whose
board they sit. Rosenstein and Wyatt (1990) find that stock prices neither increase nor
decrease on average when an insider is added to the board.

Composition of board committees Klein (2002) finds that inside director


representation on a boards investment committee correlates with improved firm
performance. She finds little evidence that the monitoring committees that are
usually dominated by independent directors_ the audit, compensation, and monitoring
committees-affect performance, regardless of how they are staffed.

2.8. Does Firm Performance Affect Board Composition?


An important issue in studying the correlation between board composition and firm
performance is the direction of causation. Board composition could affect firm
performance, but firm performance can also cause the firm to change its board
composition. Prior researchers have found limited evidence of an endogenous
relationship between firm performance and board composition in which performance
affects board composition.

Hermalin and Weisbach (1991), (using the same data set), report that the proportion
of independent directors on large firm boards increase when company has performed
poorly. This effect is statically significant but numerically small. Weisbach concludes
from this evidence that since the change in board composition following poor
performance is relatively small, and board composition changes very slowly over time
it is unlikely that the potential endogeneity of the board composition is a serious
problem.

In contrast to Hermalin and Weisbach (1991), Klein (2002) finds no evidence that
performance affects board composition. In her sample, firms in the bottom quintile for
1991 stock price returns are no more likely to add independent directors in 1992 and
1993 than the firms in the top quintile. Denis and Denis (1994) report that firms that
substantially increase their proportion of independent directors had above-average
stock price returns in the previous year. They also report that average board

composition for a group of firm changes slowly over time and that board composition
tends to regress to the mean, with firms that have a high (low) proportion of
independent directors reducing (increasing) this percentage over time.

2.9. Why Board Composition Has Become a Hot Issue in Malaysia?


The year 1997 witnessed the worst financial crisis to hit the developing world since
the 1982 Latin American debt crisis. What started out as a localized currency crisis in
Thailand, rapidly turned into a financial and economic crisis in the East Asian
countries. From being one of the best performing regions in the world, even up to as
late as May 1997, the region became one that required the largest financial rescue in
history. The speed at which the crisis spread and the severity of the contagion effects
were never experienced before. There is still no international consensus on the causes
surrounding the financial crisis. The economies of the East Asian countries contracted
in 1998 as a result of the crisis. Adverse developments unfurled. Economic outlook
was changed from positive to very negative. The expectations of both foreign and
domestic investors changed abruptly. The region was perceived as one beset with high
risks which prompted a massive reversal of capital flows from the region. This
resulted in the financial panic, investors behavior became irrational and overreacted to
the changed economic and financial situation.

Malaysia was not spared from the crisis. The Malaysian Ringgit experienced waves of
speculative pressure. It depreciated 40% against the US Dollar by the end of August
1998 from its level in June 1997. The Kuala Lumpur Stock Exchange (KLSE)
Composite Index fell by 79% from a high of 1,271 points in February 1997 to 262
points in September 1998.2 The vicious cycle of massive withdrawal of funds from
the domestic financial markets to safer offshore havens started. The effects then
spread through the banking and corporate sector. High interest rates and marked drop
in domestic demand crippled the financial performance of the corporate sector.
Companies borrowed heavily from banks to finance their rapid expansion during the
good times, sometimes expansion to areas of non-core business. This made them very
vulnerable to interest rates fluctuations. With the high interest rates and the economic
contraction the debt servicing capacity of these companies were greatly affected. This
in turn created large number of non-performing loans for the banking sector. As a
result banks began overly cautious in extending new loans even to viable businesses.

The financial crisis brought to the foreground the weak corporate governance
practices: the weak financial structure of many companies; over-leveraging by
companies; lack of transparency, disclosure and accountability; existence of a
complex system of family control companies; little or no effective laws to ensure that
controlling shareholders and management treat small investors fairly and equitably;
assets shifting; conglomerate structures that were perceived to be given preferential
treatment; allegations of cronyism the aggrandizement of a politically connected

few3; lack of transparency and ambiguity in the regulatory processes; and


weaknesses in the credit evaluation processes by the banks. Weak corporate
governance practices by these companies, though did not cause the financial crisis,
but certainly contributed to the economic crisis. Against this backdrop, the Malaysian
Code of Corporate Governance (the Code) was introduced in 2000, after detailed
study and recommendations made by the high level Finance Committee which was
formed in 1998 with the objective of improving the corporate governance practices by
the corporate sector.

2.10. CEOChairman Duality


CEOChairman duality as governance and controlling mechanisms safeguards
shareholders interest their own interests. From the perspective of the controlling
shareholder, efficiency in monitoring management could be enhanced through CEO
Chairman duality (Haniffa and Cooke, 2000) because less contracting is needed and
information asymmetry is reduced. By being a member of the board, often the
Chairman and/or CEO, IND could concentrate management control and align
company objectives with their own interests. By participating directly in managing
firms, IND could internalize transaction costs and improve firm performance through
their reputation as the figurehead of the firm via implicit contracting and tremendous
negotiating power (Redding, 1996).

3. Methodology
3.1. Determinants of Financial Status of Companies
Now it is turn to specify the determinants of corporate performance. The data
extracted for analysis belong to 2006-2007 accounting period. The reason for relying
on data before 2008 is the March stock market shocks after parliamentary election in
Malaysia. This research considers data for previous period because it was concerned
about this events effect on the behavior and performance of firms.

This study follows the way of previous studies to measure performance of companies
by taking the return on assets (ROA) and Tobins q as indicators of performance. The
return on assets is an accounting measure of profitability and efficiency, while
Tobins q captures market expectations about future earnings. Companies demand
for funds for further investment is represented by a high Tobins q value, which
should have a negative impact on dividends. Even though one would expect some
correlation between them, this may not be always the caseas a matter of fact, the
simple correlation in our sample is positive but not significant. Also the implications
are radically different in each case: while the ROA-corporate governance link reflects
a tangible, balance-sheet effect, the q-corporate governance nexus has more to do with
market perceptions about the value of corporate governance.

The expectation is that an increase in the TDI or its sub-indices leads to an increase in
the dividend to Earning or Sales. This research has focused on an agency-related
rationale for paying dividends. It is based on the idea that dividends may mitigate
agency costs by distributing free cash flows that otherwise would be spent on
unprofitable projects or as useless perks for managers. Dividends expose firms to
more frequent inspections by the capital markets as dividend payouts increase the
likelihood of new common stock issues. However, this scrutiny helps alleviate
opportunistic management behavior and thus agency costs, which, in turn, are related
to the strength of shareholder rights and corporate governance. In addition,
shareholders may prefer dividends, particularly when they fear expropriation by
insiders. As a consequence, we advance a hypothesis that dividend payouts are
determined by the strength of corporate governance.

Altmans Z-score routinely used by stockbrokers trying to determine if a company is a


good investment, bankers to determine loan risk, and internally, by anyone who wants
to take close look at his or her own company's financial health. This score calculated
by five ratios:
1. Return on total assets
2. Sales to total assets
3. Equity to debt
4. Working capital to total assets
5. Retained earnings to total assets

These ratios are then multiplied by a predetermined weight factor, and the results are
added together. The final number (the Z-score) yields a number between -4 and +22.
Financially-sound companies show Z-scores above 2.99, while those scoring below
1.81 are in fiscal danger, maybe even heading toward bankruptcy. Scores that fall
between these ends indicate potential trouble.

This research expects that higher ranks in corporate governance factors have a
positive relationship with Altmans Z-score.

The leverage ratio (debt to assets and debt to equities) shows the capital structure and
bankruptcy risk of company. The high value of leverage ratio shows that management
could not obtain shareholder interest for new projects and had to launch them by loans
from creditors. High leverage and the implied financial risk should be associated with
lower dividend payout as it discourages both paying out dividends and taking further
loans.

3.2. Determinants of Corporate Governance


TDI is used in this study to determine the strength of corporate governance practices
in listed companies. The TDI is based on public information and reflects the norms of
transparency and disclosure in a company. The TDI is composed of 25 binary items
presented in Table 3, which cover a broad range of corporate governance topics. The

binary item equals one if a company follows one of the corporate governance
standards and zero otherwise.

The TDI consists of three sub-indices: Board, Disclosure and Shareholders.

The sub-index Board measures the structure, procedures and compensation of


board and top management members.

The sub-index Disclosure measures the degree to which the company reports
relevant corporate facts to the outside stakeholders.

The shareholders, measures the quality of information regarding compensation


to minority shareholders.

Table 3 shows the percentage of positive entries for the TDI and its three sub-indices.

Table 3: Structure of the Transparency and Disclosure Index (TDI).


% of firms with public

Board structure and procedures (TDIBoard) 8 Items

information
on each item

1- Years in office of present directors

100%

2- Code of conduct for directors

100%

3- Manager and director fees

8%

4- Form of manager and director fee payment (cash, stock,


63%
stock options)

5- Information on whether manager and director fees are


58%
performance-based
6- Shareholdings of managers and directors

100%

7- Composition of the different board committees

85%

8- Details on activities of the different board committees

100%

Disclosure (TDIDisclosure) 13 Items


9- Bio of main company officers

100%

10- Bio of directors

100%

11- Calendar of future events

14%

12- English-translated corporate website

100%

13- Financial indicators for the last five years

81%

14- Strategic plan and projections for the following years

53%

15- Publication of board meeting resolutions

0%

16- Publication of shareholders meeting resolutions

100%

17- Details on the appointment process of new directors

32%

18- Details on attendance of minority and controlling


0%
shareholders at shareholders meetings
19- Reports on issues raised by dissident shareholders

0%

20- Year of hiring of the external auditor

0%

21- Report of the external auditor


Shareholders (TDIShareholders) 4 Items

100%

22- Details of corporate ownership (principal shareholders)

100%

23- Type and amount of outstanding shares

100%

24- Dividend policy in the past five years

54%

25- Projected dividend policy for the following years

70%

In the second column of Table 3 you can find % of firms with public information on
each item. These percentages reveal useful information about transparency of
companies in Bursa Malaysia and show to what extent listing rules and regulations
can force companies to reveal required information for shareholders.

3.2.1. TDI Board Sub-Indexs Notes


One of the most important notes in this sub-index is related to item number three
which is related to managers and directors fee. As data reveals only 8% of listed
companies in Malaysia announce the exact amount their managers and directors fee.
One main reason which companies avoid to reveal these data is CEOs high salary.
Also in most cases there is a huge gap between executive managers fee and other
directors fee especially independent directors.

Items 4 and 5 in Table 3 also show that only 63% and 58% of companies informing
shareholders and other stakeholder about the way of payment to managers and

whether these payments are related to their performance. This means many companies
are reluctant to specify directors remuneration.

Other items show that because of listing requirement almost 100% of companies
deliver complete information about board committees and their activities.

The last point is that according to the listing requirement all companies adopted code
of conduct for their board members and announce it every year through their Annual
Reports.

3.2.2. TDI Disclosure Sub-Indexs Notes


Items 9 and 10 disclose lots of information about directors in board. Most of the
companies manifest lots of information about their directors including:

Age

Race

Education background

The year they join to the company

Previous responsibilities in company

Previous or current responsibilities in other companies

The committees he or she is cooperating with

Status of his or her attendance in board or different committees meetings

Based on the above data, shareholders or other stakeholders can gain useful
information about board ability and diversity.

Item 11 in Table 3 shows the lack of information about future events of companies.
Based on the gathered data, only 14% of companies have a calendar of events for next
year about their future projects and plans. Even many of companies do not have any
segment in their annual reports or websites to reflect the summary of important events
for last year. This calendar of events can briefly give an idea about activities of
company to shareholders and other stakeholders. It can include future or previous
projects, contracts, and exhibitions.

Item 12 in Table 3 shows an important fact about Malaysian companies. All


Malaysian companies have English translated website and annual reports. Even many
of these companies try to have better communication with their investors through a
multi-language website or annual report. This is also an important potential to attract
foreigner investors.

Item 14 on Table 3 reveals one of Malaysian companies weaknesses. Only 53% of


Malaysian listed companies following a strategic plan or list announce that they are
following a well prepared strategic plan.

Item 15 on Table 3 illustrate that all board meeting resolutions are 100% confidential
and only board members and major shareholders who have a seat in board can have
access to those data.

Based on our research, only 13% of Malaysian listed companies are widely held. It
means, the rest of companies have at least one major shareholder with more than 20%
of share directly or indirectly. This major shareholder can be Family, Government
linked company, or a financial institute. In a country with concentrated type of
ownership, 100% confidential board resolution may lead to some kind of insider
training which may lead to restricting minority shareholders.

Item 17 in Table 3 illustrates another lack in corporate board activity. Only 32% of
firms have a specific and manifest procedure for board member nomination. Others
just mention some ambiguous information about this process or do not mention any
thing. In some companies, they have specific nomination board committee which
majority of them are independent directors which their main responsibilities are as
follows:

Identify and recommend candidates for Board directorship

Recommend directors to fill the seats on Board Committee;

Evaluate the effectiveness of the Board and Board Committees (including the
size and composition) and contributions of each individual director;

Ensure an appropriate framework and plan for Board

Items 18 and 19 also reveal that companies in Malaysia and Bursa Malaysia do not
consider any space for dissident or minority shareholders. Item 18 shows that the
companies does not keep any information about attendance in Annual General
Meeting (AGM). It is obvious that major shareholders or their proxy attend AGM and
it is not important for companies to show their minority shareholders also participate
in AGM.

Item 19 in Table 3 also reveals that even if dissident minority shareholders have
ability to raise their questions, companies do not consider any mechanism to inform
other shareholders about those issues. It is obvious that majority shareholders not
even are possible to raise any issue; they can influence board in any way because they
have some seats and nominees in board which present their opinion in board
meetings. They have this ability because they are holding more than 20% of the
companys share in their hand and every time in AGM voting for new board members
they can influence votes.

On the other hand, it is very difficult for minority shareholders to even transfer their
opinions to the board members. In this study, we look at the ways investors can
communicate to the board to raise their issues. Unfortunately, many firms in Malaysia
only let their minority shareholders to contact them in AGM and through proxy letter

or voting process about predefined resolutions. It is not even possible for minority
shareholders to raise their resolution in AGM.

In some companies the situation is better and there some or all the following ways to
raise your problems and issues through communicating with board members or their
nominee. The following items show some of the ways which companies use for
communication which unfortunately some of them are not bidirectional and just are
used as a way to inform shareholders or other stakeholders about companies status.

The Annual Report

The various disclosures and announcements made to the Bursa Malaysia


Securities Berhad including the Quarterly Results and Annual Results

During the year, the Managing Director and/or key management personnel also
hold discussions with the press and analysts when necessary, to provide
information on the groups or companys strategy, performance and major
developments.

Press briefing which is held after each Annual General Meeting.

Companys website at www.XYZ.com.my.

Sending query through website of the company.

Only a few companies introduces a specific person as investor relation which all
shareholders can contact him and raise their issues.

Items 20 and 21 in Table 3 also illustrate one disadvantage and one advantage of
listing requirement rules for company disclosure.

Item 21 shows that according to the rules all companies should put their auditors
report in Annual Report. This is very helpful for shareholders and other stakeholders.
It shows that all the announced results and all the accounting data of company are
audited by a separate auditor and they are reliable which it is a positive point.

On the other hand, Item 20 in Table 3 shows that there is no information available
about the year of hiring of the external auditor. It seems to be a negative point since a
long relationship between firms and their auditors can influence the strictness of
auditors. A long relationship may cause auditors to behave more leniently to their
customers since firms are their long term customers and on the other hand they do not
want to lose them.

3.2.3. TDI Shareholder Sub-Indexs Notes


Based on listing requirement for Malaysian companies, they should reveal data related
to their shares and major shareholders. As Items 22 and 23 in Table 3 show 100% of
Malaysian listed companies follow this rule.

All Annual Reports of companies have Analysis of Shareholdings section which


reveals much useful information about major shareholders of company.

This section consists of following parts:

Share Capital
o Number of authorized shares
o Share in use
o Issued and paid up
o Nominal Value
o Voting right for example 1 vote per each ordinary share

Size and distribution of shareholding and corresponding percentage

Location and country of shareholding

Category of shareholding and their corresponding percentage


o Individual
o Banks/Finance Companies
o Investment Trusts/Foundations/Charities
o Government Agencies/Institutions
o Nominees

List of 30 Largest Shareholders which shows numbers of shares and percent


of issued shares

Substantial share holders


o Direct interest
o Indirect interest
o Deemed interest

Also if they have any subsidiary or any other kinds of shares such as warrant they
should reveal it in the Annual Report.

Beside the above information, all Malaysian listed companies reveal Directors
Interest. They show how many shares and percentages of shares are owned directly or
indirectly by board members.

Items 24 and 25 reveal dividend policy of firms. Item 24 shows that only 54% of
Malaysian listed has a part to show their dividend policy in the past five years and
Item 25 illustrates that 70% of firms announce in advance about their next period
dividend policy. Revealing more data about dividend policy can increase investors
confidence and persuade them for more investment.

3.3. Controlling Variables


To increase the confidence of the results, there are set of controls variables which are
included in the regressions. The study expects firm size may have a negative effect if
size is correlated with the exhaustion of growth opportunities, but may contrarily have
a positive impact whenever size is correlated with more diversification, greater
economies of scale and scope, more professionalized management, and less severe
financial constraints.

Sales growth is a proxy for the product demand faced by the firm and its productivity.
Additionally, firms are classified into three broad sectors (production, services, and
others) that vary in productive technology and international tradability.

Production: Industrial, Construction, Technology

Service: Trading/Service, Consumer, Properties, Hotels

Others: Plantation,

The percentage of independent board members also is important. On one hand, higher
percentage of independent board members can improve performance of company,
because they are not hired by managers and play supervisory role on behalf of
shareholders. On the other hand, because they are not full time, or they are chosen
from other fields, they can only consider as free riders who only attend meeting and
do not have any positive effect on performance and financial status of company.

Another factor we thought maybe is important in the ownership structure of company.


We call a company widely held when the major share holder has more than 20% of
the shares directly or indirectly. We thought this factor should have positive effect on
ROA, Tobins Q, Altmans Z-score, and leverage ratios of company. Since the
company ownership is concentrated, the owner can employ his management team and
execute his program in corporation which leads to an increase in performance and a
reduction in risk. On the other hand, this factor can decrease dividend payment ratios.

Because concentrated owner prefer to work with remaining cash flow from retained
earning instead of dividing it between minority shareholders.

At last but not the least is CEO duality. Some say this factor can increase performance
of factory because management team and board of directors are guided by one person
and CEO has more freedom to apply his plans. But others say that lack of supervision
on CEO from Chairman can increase the risk of misbehavior from CEO. In this
situation CEO may enter into some deals which only secure his benefits not
stakeholders opinion.

3.4. Sources of Data


The required data are exploited from many different sources. To find the list of
companies in Bursa Malaysia we refer to FTSE Indices. We have chosen our
companies among the following companies:

FTSE Bursa Malaysia Large 30 Index: This tradable index comprises the 30
largest companies in the FTSE Bursa Malaysia (FBM) EMAS index by market
capitalization.

FTSE Bursa Malaysia Mid 70 Index: Comprises the next 70 companies in the
FTSE Bursa Malaysia EMAS Index by full market capitalization.

FTSE Bursa Malaysia Small Cap Index: Comprises those eligible companies
within the top 98% of the Bursa Malaysia Main Board excluding constituents
of the FTSE Bursa Malaysia 100 Index.

FTSE Bursa Malaysia Second Board Index: The FTSE Bursa Malaysia Second
Board Index comprises all eligible companies listed on the Second Board. No
liquidity screening is applied.

FTSE Bursa Malaysia MESDAQ Index: The FTSE Bursa Malaysia MESDAQ
Index comprises all eligible companies listed on the MESDAQ Market. No
liquidity screening is applied.

All companies selected randomly. We exclude Banks and Finance companies from
our list because of their specific rules and regulations. Also, eliminate all utility and
affiliates of foreign firms.

To obtain required data, we used Bursa Malaysia official website, and Stock
Performance Guide (Malaysia) book published by Dynaquest SDN BHD, edition
March 2008. Beside two above sources of data, we extracted all 25 governance items
from companies 2006-2007 annual reports. For some specific data which we couldnt
find them we used Business Week official website.

3.5. Theoretical Framework and Main Research Hypotheses


The final analysis has done by the following formulas:

Formula 1:

Formula 2:

Y is one of the 7 financial statuses of the companies.


Formula 1 shows the relationship between performance indicators and TDI subindices. At this formula all the sub-indices including Board, Disclosure, and
Shareholding are used beside Control items.

In Formula 2 TDI is used as a whole number beside other controlling items.


The controlling factors are Size or Capital Market, Board Balance, Corporate
Ownership, and CEO Duality.

Figure 1 shows the theoretical framework and the relationship between 7 Independent
Variables and 7 Dependent Variables.

Figure 1: Theoretical
T
Fraamework

Indeepenndennt
Vaariabbles

Deppenddent
Vaariables

TDI
T - Booard

ROA

TDII - Discllosure

T
Tobin's
Q

TDI - Shareeholders

Dividdend / Eaarning

Size

Diviidend / Sales
S

Bo
oard Ballance

Altm
man's Z-S
Score

Ownersh
O
hip

Deebt / Asssets

CEO
C
Duaality

Debbt / Equiities

Based on the hypothesis each of these transparency and disclosure indexes predicted
to have the following relationships on dependent variables:

Dependent Variable

TDI

TDI (Board)

TDI (Disclosure)

TDI (Shareholders)

Board Independence

Size

Ownership

CEO Duality

Table 4: Estimation of effect of Independent Variables on Dependent Variables

ROA

/-

/-

Tobins Q

/-

/-

Dividend / Earning

Dividend / Sales

Altmans Z Score

Debt / Assets

Debt / Equity

3.6. Scope of the Study


The 100 selected companies for this study, all are firms from first and second boards
in Bursa Malaysia which are selected randomly. To come up with more exact
information, two types of firms are excluded from the list. First all affiliates of foreign
firms were excluded. A firm is defined as an affiliate of a foreign company if at least

50 percent of its votes are directly controlled by a single foreign corporate owner.
Further, we banks and utilities were excluded from the sample, to prevent the
domination of this sample by these two industries.
All the collected data are related to 2007 financial year.

4. Data Analysis and Results


4.1. Descriptive Analysis
Table 5 shows number of observations, mean, median, standard deviation, maximum,
and minimum for corporate governance factors.

Table 5: Descriptive Data for Management and Ownership Data

TDI

TDI1

TDI2

TDI3

BOARDIND

LNSIZE

WIDE

CEO

Mean

16.19

6.15

6.80

3.24

46%

5.75

13%

15%

Median

16.00

6.00

7.00

3.00

43%

5.46

0.00

0.00

Maximum

21.00

8.00

9.00

4.00

89%

10.09

1.00

1.00

Minimum

11.00

4.00

5.00

2.00

27%

2.83

0.00

0.00

Std. Dev.

2.32

1.00

1.16

0.77

14%

1.53

0.34

0.36

Skewness

-0.04

-0.31

0.08

-0.44

1.04

0.79

2.18

1.94

Kurtosis

2.26

2.54

2.15

1.82

3.55

3.13

5.77

4.78

Some important notes of Table 5:

Only 13% of Malaysian listed companies are widely held, the rest of them has
at least 1 major shareholder with more than 20% of shares directly or
indirectly

CEO duality in Malaysia does not have a high rate (15%)

Rules and Regulations are not enough to force companies to reveal all
required data for transparency. The gap between companies in TDI factor and
its sub-Indices is high.
o TDI Max = 21 while TDI Min = 11
o TDI Board Max = 8 while TDI Board Min = 4
o TDI Disclosure Max = 9 while TDI Disclosure Min = 2
o TDI Shareholders Max = 4 while TDI Shareholder Min = 2

Table 6 shows descriptive information for Dependent Variables.

Table 6: Dependent Variables Descriptive Analysis

ROA

TOBIN

DIV/EARNING

DIV/SALE

ZSCORE

DEBT/ASSET

DEBT/EQUITY

Mean

6%

4.52

159%

5%

4.16

37%

80%

Median

6%

1.75

29%

2%

3.14

39%

64%

Maximum

52%

85.50

12317%

53%

20.12

83%

475%

Minimum

-30%

0.17

-172%

0%

0.65

5%

5%

Std. Dev.

10%

11.34

1229%

9%

3.37

19%

75%

Skewness

0.73

5.47

9.83

3.64

2.20

0.16

2.19

10.57

35.29

97.71

18.30

8.34

2.01

10.30

Kurtosis

4.2. Correlation between Independent Variables


Table 8 shows Corporate Governance and Ownership Correlation Matrix which
shows significant at 5% with bold.

Table 7: Corporate Governance and Ownership Correlation Matrix

TDI

TDI1

TDI2

TDI3

BOARDIND

LNSIZE

WIDE

TDI

1.0000

TDI1

0.7909

1.0000

TDI2

0.8615

0.5084

1.0000

TDI3

0.6772

0.3083

0.4205

1.0000

BOARDIND

-0.0050

-0.0501

0.0069

0.0396

1.0000

LNSIZE

0.5064

0.3066

0.5695

0.2647

-0.0373

1.0000

WIDE

-0.0843

0.0009

-0.0356

-0.2010

0.0244

-0.0757

1.0000

CEO

-0.0841

-0.0641

-0.1213

0.0134

-0.0522

0.0006

0.0025

CEO

1.0000

Table 7 illustrates that except high correlation between TDI and TDI Board ( r =
0.7909) and TDI and TDI Disclosure ( r = 0.8615) there is no other correlation

between Independent Variables. These two relations also do not cause any problem
because they are used separately in regressions.

4.3. Regression Analysis


Tables 8 to 14 show the regression of ROA, Tobins Q, Dividend on Earning,
Dividend on Sales, Altmans Z-Score, Debt on Assets, and Debts on Equities, against
the TDI sub-indices with controlling variable.
Table 8: ROA as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI1
TDI2
TDI3
BOARDIND
LNSIZE
WIDE
CEO

-0.003249
0.018352
0.024882
-0.047127
0.027769
-0.038316
-0.017854

0.009013
0.010194
0.012605
0.056134
0.006913
0.026001
0.024062

-0.360433
-1.800338
1.973960
-0.839544
4.016946
-1.473630
-0.741985

0.7193
0.0751
0.0514
0.4033
0.0001
0.1440
0.4600

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.259946
0.211681
0.085479
0.672215
106.6438

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.063342
0.096274
-2.013006
-1.829512
2.081316

Table 8 illustrates that TDI-Disclosure and TDI-Shareholders have significant


positive effect on ROA which support original hypothesis (at 10% significance). Size
also has a positive effect on ROA which is on contrast with original hypothesis ( at
5% significance).

Table 9: Tobins as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI1
TDI2
TDI3
BOARDIND
LNSIZE
WIDE
CEO

-1.478181
-0.165463
-0.749238
-10.70727
3.878258
-2.686535
3.486965

1.032954
1.168299
1.444665
6.433408
0.792272
2.979937
2.757753

-1.431023
-0.141627
-0.518624
-1.664323
4.895112
-0.901541
1.264423

0.1558
0.8877
0.6053
0.0995
0.0000
0.3697
0.2093

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.306209
0.260962
9.796631
8829.607
-362.7668

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

4.559091
11.39576
7.470037
7.653530
2.087302

Table 9 illustrates that Board Independence (significant at 10%) and Size (significant
at 5%) have a negative effect on Tobins Q which are on contrast with the first
hypothesis. Increase in Board Independence means directors from other fields which
may have less experience or interest in company. This increase can reduce the
performance of board of directors which has a negative effect on Tobins Q.

Also Size shows again a positive effect on performance of company. This means
bigger companies in Malaysia have better performance in comparison with their
smaller counter parts.

Table 10: Dividend/Earning as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI1
TDI2
TDI3
BOARDIND
LNSIZE
WIDE
CEO

-1.880107
1.537754
1.028724
3.820185
-0.424548
-0.634703
-0.852145

1.327632
1.501588
1.856794
8.268707
1.018288
3.830042
3.544474

-1.416136
1.024085
0.554032
0.462005
-0.416923
-0.165717
-0.240415

0.1601
0.3085
0.5809
0.6452
0.6777
0.8687
0.8105

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.024424
-0.039201
12.59138
14585.94
-387.6132

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

1.601336
12.35161
7.971985
8.155478
2.031301

Table 10 reveals that none of corporate governance and ownership factors do not have
significant effect on Dividend/Equity.

Table 11: Dividend/Sales as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI1
TDI2
TDI3
BOARDIND
LNSIZE
WIDE
CEO

-0.005626
-0.016329
0.011712
0.024991
0.026624
-0.015314
-0.021197

0.008773
0.009922
0.012269
0.054637
0.006728
0.025308
0.023421

-0.641367
-1.645698
0.954597
0.457402
3.956933
-0.605121
-0.905037

0.5229
0.1032
0.3423
0.6485
0.0001
0.5466
0.3678

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.174683
0.120858
0.083199
0.636837
109.3200

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.051398
0.088734
-2.067070
-1.883577
2.145201

Table 11 illustrates that size is again has a significant positive effect on Dividend /
Sales (Significant at 10%). This reveals the fact that mature companies instead of
keeping their free cash flow as retained earnings for further investing and growth,
prefer to pay it to their shareholders as dividend.

Table 12: Altman's Z-Score as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI1
TDI2
TDI3
BOARDIND
LNSIZE
WIDE
CEO

0.189712
0.705485
0.465310
4.221937
0.730739
0.697329
0.582988

0.340287
0.384874
0.475918
2.119365
0.260999
0.981684
0.908490

0.557506
-1.833027
0.977712
1.992077
2.799778
0.710339
0.641711

0.5785
0.0700
0.3308
0.0493
0.0062
0.4793
0.5227

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.141152
0.085140
3.227316
958.2320
-252.8384

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

4.182828
3.374148
5.249261
5.432755
1.792441

Table 12 shows that TDI-Disclosure, Board Independence, and Size have cause
reduction of the risk of companies. Those factors can cause increase in Altmans ZScore which shows the reduction in risk.

Also Size can reduce the risk of a firm. Bigger Size shows more stable business and
higher Working Capital and easier access to other kinds of funds which can reduce the
risk.

At last Board Independence can increase the supervisory role of directors on


executive managers which can reduce the risk.

Table 13: Dept/Assets as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI1
TDI2
TDI3
BOARDIND
LNSIZE
WIDE
CEO

0.029063
0.034701
-0.016711
-0.015253
0.001942
0.028370
0.014697

0.020824
0.023552
0.029123
0.129693
0.015972
0.060073
0.055594

1.395697
1.473373
-0.573802
-0.117606
0.121579
0.472253
0.264370

0.1662
0.1441
0.5675
0.9066
0.9035
0.6379
0.7921

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.008020
-0.056675
0.197493
3.588330
23.73801

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.374748
0.192124
-0.338142
-0.154648
1.786443

Table 14: Debt/Equity as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI1
TDI2
TDI3
BOARDIND
LNSIZE
WIDE
CEO

0.093622
0.033090
-0.016360
-0.163052
0.020930
0.058155
-0.008705

0.080771
0.091354
0.112964
0.503053
0.061951
0.233013
0.215639

1.159112
0.362213
-0.144823
-0.324124
0.337847
0.249578
-0.040367

0.2494
0.7180
0.8852
0.7466
0.7362
0.8035
0.9679

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.019254
-0.044708
0.766037
53.98670
-110.4590

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.804052
0.749466
2.372909
2.556402
1.809582

Table 13 and 14 reveals that TDI sub-indices and other controlling factors do not have
any significant effect on Capital Structure of company.

The overall assessment is that the TDI has a positive and significant effect on ROA,
Tobins Q, Dividend/Earning, Dividend/Sales, but not for Altmans Z-score and
Leverage of company.

Tables 15 to 21 show the regression of ROA, Tobins Q, Dividend on Earning,


Dividend on Sales, Altmans Z-Score, Debt on Assets, and Debts on Equities, against
the whole TDI with controlling variable.

Table 15: ROA as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI
BOARDIND
LNSIZE
WIDE
CEO

-0.002635
-0.044884
0.023988
-0.050441
-0.010895

0.002933
0.057162
0.006688
0.025857
0.024289

-0.898657
-0.785208
3.586810
-1.950798
-0.448549

0.3711
0.4343
0.0005
0.0541
0.6548

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.215337
0.181947
0.087076
0.712734
103.7465

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.063342
0.096274
-1.994879
-1.863812
2.047510

Table 16: Tobin's Q as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI
BOARDIND
LNSIZE
WIDE
CEO

0.829854
-10.63602
4.017654
-2.771222
3.334074

0.327231
6.378543
0.746269
2.885266
2.710365

-2.535989
-1.667469
5.383657
-0.960474
1.230120

0.0129
0.0987
0.0000
0.3393
0.2217

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.302672
0.272998
9.716526
8874.622
-363.0186

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

4.559091
11.39576
7.434718
7.565785
2.088513

Table 17: Dividend /Earning as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI
BOARDIND
LNSIZE
WIDE
CEO

0.031387
4.090458
-0.121869
-1.217842
-1.106273

0.424749
8.279423
0.968665
3.745109
3.518085

0.073896
0.494051
-0.125811
-0.325182
-0.314453

0.9412
0.6224
0.9002
0.7458
0.7539

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

-0.000078
-0.042634
12.61216
14952.27
-388.8411

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

1.601336
12.35161
7.956386
8.087452
1.995623

Table 18: Dividend / Sale as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI
BOARDIND
LNSIZE
WIDE
CEO

-0.005765
0.026362
0.024100
-0.022975
-0.016635

0.002808
0.054742
0.006405
0.024762
0.023261

-2.052945
0.481574
3.762900
-0.927849
-0.715150

0.0429
0.6312
0.0003
0.3559
0.4763

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.152891
0.116844
0.083389
0.653652
108.0299

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.051398
0.088734
-2.081412
-1.950345
2.187311

Table 19: Altman's Z-Score as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI
BOARDIND
LNSIZE
WIDE
CEO

-0.081596
4.238145
0.589619
0.477894
0.797276

0.109331
2.131127
0.249335
0.963992
0.905556

-0.746322
1.988687
2.364769
0.495745
0.880427

0.4573
0.0496
0.0201
0.6212
0.3809

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.112085
0.074302
3.246376
990.6618
-254.4860

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

4.182828
3.374148
5.242141
5.373207
1.716506

Table 20: Debt / Assets as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI
BOARDIND
LNSIZE
WIDE
CEO

0.021037
-0.019048
0.005456
0.045550
0.007077

0.006643
0.129491
0.015150
0.058574
0.055023

3.166687
-0.147096
0.360108
0.777645
0.128622

0.0021
0.8834
0.7196
0.4387
0.8979

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

-0.011109
-0.054135
0.197256
3.657525
22.79258

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.374748
0.192124
-0.359446
-0.228379
1.812605

Table 21: Debt / Equity as Dependent Variable

Method: Least Squares


Variable

Coefficient

Std. Error

t-Statistic

Prob.

TDI
BOARDIND
LNSIZE
WIDE
CEO

0.046844
-0.172741
0.019054
0.089456
-0.012529

0.025596
0.498922
0.058372
0.225682
0.212001

1.830161
-0.346228
0.326427
0.396379
-0.059098

0.0704
0.7299
0.7448
0.6927
0.9530

R-squared
Adjusted R-squared
S.E. of regression
Sum squared resid
Log likelihood

0.013626
-0.028347
0.760015
54.29649
-110.7422

Mean dependent var


S.D. dependent var
Akaike info criterion
Schwarz criterion
Durbin-Watson stat

0.804052
0.749466
2.338227
2.469293
1.829001

Tables 15 to 21 reveal that whole TDI has positive significant effect on Tobins Q,
Dividend / Sales, Debt / Assets, and Debt / Equity of company.

4.4. Regression Results


Table 22 sums up the whole results in one table.
Positive sign () is used when there is a significant positive effect on Dependent
Variable.
Negative sign (-) is used when there is a significant negative effect on Dependent
Variable.
Cross sign () is used to show that there is no significant relationship.

Dependent Variable

TDI

TDI (Board)

TDI (Disclosure)

TDI (Shareholders)

Board Independence

Size

Ownership

CEO Duality

Table 22: Regression Summary

ROA

Tobins Q

Dividend / Earning

Dividend / Sales

Altmans Z Score

Debt / Assets

Debt / Equity

Significant at 5% level

Significant at 10% level

5. Conclusion
Two goals were followed in this research. First, it gathers, a comprehensive
quantitative measures on the quality of the corporate governance and the ownership
structure in 100 non-financial listed companies in Malaysia with information for
financial year 2007 which are available in Appendices A to D. To do it, a wide array
of official and private sources was used. In summary, companies in Malaysia seem to
follow Code of Corporate Governance. In turn, ownership appears to be quite
concentrated at the level of the largest ultimate shareholder which our data showed
that only 13% of companies are widely held and 87% of remaining are on the hand of
major shareholders directly or through pyramiding. Second, this study tests the
predictions of recent theories linking those measures with corporate performance and
dividend policy in 2007.

The results of this study show a significant positive effect of TDI and its sub-indices
on all performance indicators except Dividend / Earning. Size also has a significant
positive effect on performance and dividend payment of company. While Board
Independence can decrease the Tobins Q of a company by reducing the efficiency of
board of directors, it can increase the Altmans Z-score which causes a reduction in
liquidation of company. It means diversity of board members and supervision of
independent board can reduce the risk of company.

Any policy recommendation emerging from this research should take into account
that improving corporate governance entails the consideration of both the private and
the public interest. Controlling shareholders will not be inclined to cooperate with
such change unless the incremental benefits (acting as regular shareholders) outweigh
the loss of their private benefits of control. The evidence reported here on the ROAgovernance nexus will hopefully be taken into account by insiders. Less apparent are
the benefits from higher Tobins Q.

But corporate governance is, at the same time, a public policy issue in that
uninformed minority shareholders should be legally protected against expropriation.
Raising awareness among investors and businesses about improving corporate
governance is a first, obvious step that should be taken by the authorities to stimulate
a cultural change in this area. Likewise, our average TDI scores suggest that
disclosure requirements frequently found in other emerging and developed markets
should be put in place.

In addition, a compulsory, full-fledged regime of strict governance provisions may be


self-defeating as long as some companies may ultimately decide to delist, and
delisting is another chronic problem of the Malaysian stock exchange that forms part
of the future research agenda The case of Maxis. This conclusion comes from the
observation that implementing a proper governance framework is costly and timeconsuming, and some expected benefits may not easily materialize. Thus, a balance

between the adequate protection of minority shareholders and the incentive structure
of controlling shareholders should be attained in designing corporate governance
reforms.

The other areas which are open to see their results in performance and risk of
company are as follows:

Board and executive remuneration program

The effect of options and other incentives to motivate board members for
better performance

Board dedication which means busy board members which are working in
several companies do have any effect on performance of firm

The industry which can play a dummy role in controlling variables

6. References
Anderson, R. C. and Reeb, D. M. (2002) Founding family Ownership, Corporate
Diversification, and Firm Leverage, http://www.cba.ua.edu/
~dreeb/Fam_diversification_Aug07_2002.pdf
Baysinger, B., and H. Butler, 1985, Corporate governance and the board of directors:
performance effects of changes in board composition, Journal of Law, Economics,
and Organization 1, 101124.
Black, F., (1976) The dividend puzzle, Journal of portfolio management, 2, 58.
Bebczuk, R., (2005) Corporate governance and ownership: measurement and impact
on corporate performance and dividend policies in Argentina. Center for Financial
Stability working paper.
Cheng, S. (2003) Time to Revamp Insider Boards, National Real Estate Investor, 45,
72.
Claessens, S., Djankov, S. and Lang, L. H. P. (2000) The Separation of Ownership
and Control in East Asian Corporations, Journal of Financial Economics, 58, 81112.
Coles, J.W., Mc Williams, V.B. and Sen, N. (2001) An Examination Of The
Relationship Of Governance Mechanisms To Performance, Journal of Management,
Volume 27, pp. 23-50.
Demsetz, H. and Villalonga, B. (2001) Ownership Structure and Corporate
Performance, Journal of Corporate Finance, 7, 209233.
Denis, David, and Diane Denis, 1994,Majority owner-managers and organizational
efficiency, Journal of Corporate Finance 1, 91,118.
Ferris, S., N. Sen, and H. Yui, 2006, God save the queen and her dividends: Corporate
payouts in the United Kingdom, Journal of Business 70, 1149-1173.
Gompers, P., Ishii, J.L. and Metrick, A., (2003) Corporate governance and equity
prices. Quarterly journal of economics, 118, 107155.
Grossman, S. and Hart, O., (1980) Disclosure laws and take-over bids, Journal of
finance, 35, 323334.

Haniffa, R. and Cooke, T. (2000) Culture, Corporate Governance and Disclosure in


Malaysian Corporations. Paper presented at the Asian AAA World Conference,
Singapore, 2830 August.
Hermalin, B. E. and M. S. Weisbach, The Effects of Board Composition and Direct
Incentives on Firm Performance, Financial Management 20 (1991), pp. 101112.
Houle, C. O. (1990) Who Should be on your Board?, Nonprofit World, 8, 3335.
Jensen, Michael, and William Meckling, 1976, Theory of the firm: Managerial
behavior, agency costs, and ownership structure. Journal of Financial Economics 3,
305-360.
Klein, A. (2002) Economic Determinants of Audit Committee Independence, The
Accounting Review, 77, 2, 435452.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1998) Law and
Finance, Journal of Political Economy, 106(6), 11131155.
La Porta, et al. (1999) Agency Problems and Dividend Policies Around the World,
Cambridge, United States: Harvard University.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R., (2000), Investor
protection and corporate governance. Journal of financial economics, 58 (12), 327.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R., (2002), Agency
problems and dividend policies around the world. Journal of finance, 55 (1), 133.
Lim, M. H. (1981) Ownership and Control of the One Hundred Largest Corporations
in Malaysia. Kuala Lumpur: Oxford University Press.
Lins, K. V. (2003) Equity Ownership and Firm Value in Emerging Markets, Journal
of Financial and Quantitative Analysis, 38, 159184.
MacAvoy, P., S. Cantor, J. Dana, and S. Peck. 1983. ALI Proposals for Increased
Control of the Corporation by the Board of Directors: An Econometric Analysis.
Statement of the Business Roundtable on the American Law Institutes proposed
Principles of Corporate Governance and Structure: Restatement and
Recommendation. Business Roundtable, New York.
Malaysia, Capital Market Master Plan (2001): Securities Commission.
Malaysia, Financial Sector Master Plan (2001): Bank Negara Malaysia.

Malaysia, The Central Bank and the Financial System in Malaysia- A Decade of
Change(1999): Bank Negara Malaysia.
McConaughy, D. L. (2000) Family CEOs vs. Nonfamily CEOs in the FamilyControlled Firm: an examination of the level and sensitivity of pay to performance,
Family Business Review, 13, 121131.
Mehran, Hamid. 1995. Executive Compensation Structure, Ownership, and Firm
Performance. Journal of Financial Economics 38(2). 163-184.
Mitton, T., 2002, A cross-firm analysis of the impact of corporate governance on the
East Asian financial crisis, Journal of Financial Economics 64, 215-241.
Nagar, V., Petroni, K. and Wolfenzon, D. (2000) Ownership Structure and Firm
Performance in Closely-Held Corporations, University Chicago.
Park, Y. W. and Shin, H. H. (2003) Board Composition and Earnings Management in
Canada, Journal of Corporate Finance, 185, 127.
Redding, S. G. (1996) Weak Organizations and Strong Linkages: managerial Ideology
and Chinese family networks. In G. G. Hamilton (ed.) Asian Business Networks.
Berlin: Walter de Gruyter.
Rosenstein, Stuart, and Jeffrey G. Wyatt. 1990. Outside Directors, Board
Independence, and Shareholder Wealth. Journal of Financial Economics 26(2). 175191.
Shankar, S. J. (1999) Crusade for Better Governance, New Strait Times, 4 May, 13.
Suto, M. (2003) Capital Structure and Investment Behaviour of Malaysian Firms in
the 1990s: a study of corporate governance before the crisis, Corporate Governance,
11, 2539.
Wiwattanakantang, Y. (2001) Controlling Shareholders and Corporate Value:
evidence from Thailand, Pacific-Basin Finance Journal, 9, 323362.
Yermack, David, 1997, Good timing: CEO stock option awards and company news
announcements. Journal of Finance 52, 449-476.

Appendix A: Financial Status of Companies (Dependent Variables)


Dividend /
Company

ROA

Dividend /

Tobin's Q

Debt /

Debt /

Assets

Equities

Z score
Earning

Sales

A & M REALTY BHD

9.86%

1.40

5.78%

3.44%

3.16

63.42%

173.38%

ALUMINIUM COMPANY OF MALAYSIA BHD

5.66%

1.03

52.25%

1.87%

5.99

14.12%

16.45%

AMWAY (M) HOLDINGS BHD

29.69%

6.45

75.17%

11.31%

13.71

23.69%

31.05%

APOLLO FOOD HOLDINGS BHD

13.00%

2.65

59.63%

9.49%

9.92

9.59%

10.61%

ASTINO BHD

7.83%

1.24

28.63%

1.65%

3.01

46.97%

88.57%

ATIS CORPORATION BHD

5.54%

2.62

0.00%

0.00%

2.54

54.23%

118.48%

BINA PURI HOLDINGS BHD

1.43%

0.80

43.51%

0.50%

1.36

82.60%

474.70%

BOLTON BHD

7.82%

0.89

9.33%

1.78%

1.83

51.51%

106.21%

BRITISH AMERICAN TOBACCO (M) BHD

51.72%

85.50

128.34%

24.52%

12.52

75.56%

309.16%

CARLSBERG BREWERY MALAYSIA BHD

13.29%

8.24

105.18%

9.20%

10.91

20.18%

25.28%

CHIN WELL HOLDINGS BHD

3.13%

1.90

47.18%

2.10%

2.21

47.72%

91.29%

CYCLE & CARRIAGE BINTANG BHD

1.71%

2.10

109.77%

1.17%

4.25

26.76%

36.55%

CYMAO HOLDINGS BHD

-3.26%

0.60

-66.25%

2.09%

4.83

11.58%

13.10%

DAIMAN DEVELOPMENT BHD

4.32%

1.65

36.01%

15.73%

4.48

8.30%

9.05%

DK LEATHER CORPORATION BHD

-12.55%

2.45

0.00%

0.00%

3.22

38.94%

63.77%

DOMINANT ENTERPRISE BHD

8.72%

1.04

27.66%

1.35%

3.49

45.76%

84.35%

Dividend /
Company

ROA

Dividend /

Tobin's Q

Debt /

Debt /

Assets

Equities

Z score
Earning

Sales

EASTERN PACIFIC INDUSTRIAL CORP. BHD

8.40%

1.72

39.66%

6.90%

19.13%

23.66%

ENG KAH CORPORATION BHD

11.49%

2.83

110.45%

19.35%

12.71

12.32%

14.06%

ENG TEKNOLOGI HOLDINGS BHD

3.45%

1.25

48.22%

1.43%

1.97

52.53%

110.67%

ESSO MALAYSIA BHD

2.16%

6.36

41.56%

0.24%

4.14

74.83%

297.34%

ESTHETICS INTERNATIONAL GROUP BHD

9.96%

1.40

41.25%

4.55%

4.02

23.62%

30.92%

FABER GROUP BERHAD

6.35%

0.82

10.48%

0.81%

2.13

50.78%

103.15%

FACB INDUSTRIES INCORPORATED BHD

3.95%

0.61

18.23%

0.72%

1.97

47.83%

91.69%

FIMA CORPORATION BHD

11.08%

2.18

32.37%

5.68%

4.42

19.40%

24.07%

FORMOSA PROSONIC INDUSTRIES BHD

0.01%

0.96

12316.50%

0.43%

3.11

36.46%

57.38%

GAMUDA BHD

3.72%

3.14

181.32%

22.17%

2.21

40.00%

66.68%

GENTING BHD

6.60%

65.00

49.91%

11.70%

3.53

28.58%

40.01%

GHL SYSTEMS BHD

0.76%

0.59

81.68%

1.35%

4.5

17.95%

21.88%

GRAND CENTRAL ENTERPRISES BHD

4.89%

0.70

32.49%

7.92%

3.42

11.89%

13.49%

HAP SENG CONSOLIDATED BHD

8.58%

2.58

152.32%

11.24%

5.7

17.02%

20.51%

HIAP TECK VENTURE BHD

7.54%

3.20

8.25%

0.46%

3.12

56.32%

128.96%

HIROTAKO HOLDINGS BHD

3.37%

1.09

62.82%

4.16%

3.55

13.77%

15.97%

HOVID BHD

5.28%

2.65

25.01%

2.85%

1.89

57.51%

135.35%

HUNZA PROPERTIES BHD

7.52%

1.99

32.73%

6.88%

2.61

46.39%

86.53%

HUP SENG INDUSTRIES BHD

3.06%

1.20

90.76%

2.24%

3.43

26.53%

36.11%

Dividend /
Company

ROA

Dividend /

Tobin's Q

Debt /

Debt /

Assets

Equities

Z score
Earning

Sales

I-BHD

1.16%

1.20

109.13%

52.29%

5.6

10.56%

11.80%

IGB CORP BERHAD

3.22%

3.12

27.21%

5.53%

2.53

35.62%

55.33%

INTI UNIVERSAL HOLDINGS BHD

0.58%

2.06

117.17%

1.78%

2.03

28.05%

38.99%

IPMUDA BHD

0.79%

0.89

0.00%

0.00%

2.45

63.51%

174.05%

JAYCORP BHD

6.44%

1.30

32.73%

1.41%

3.35

38.92%

63.72%

JOHORE TIN BHD

-3.34%

0.48

-38.00%

1.75%

2.24

29.22%

41.29%

KENCANA PETROLEUM BHD

9.82%

15.50

0.00%

0.00%

5.24

62.21%

164.65%

KNM GROUP BHD

15.60%

24.63

7.22%

1.11%

7.08

53.63%

115.64%

KPJ HEALTHCARE BHD

6.41%

3.10

28.27%

1.89%

2.18

53.38%

114.49%

KSL HOLDINGS BHD

17.27%

2.00

19.88%

8.44%

6.6

14.26%

16.63%

KUALA LUMPUR CITY CORPORATION BHD

2.24%

0.90

0.00%

0.00%

9.59

5.01%

5.28%

LANDMARKS BHD

37.86%

2.32

1.26%

14.28%

3.45

18.98%

23.42%

LB ALUMINIUM BHD

4.53%

0.86

32.74%

1.40%

2.44

43.70%

77.63%

LBS BINA GROUP BHD

0.48%

0.40

0.00%

0.00%

0.99

66.66%

199.90%

LINGUI DEVELOPMENT BHD

8.16%

2.70

12.69%

1.98%

2.28

46.38%

86.49%

LION DIVERSIFIED HOLDINGS BHD

9.66%

2.54

3.05%

0.36%

2.1

49.93%

99.73%

MAGNI-TECH INDUSTRIES BHD

2.59%

0.91

88.71%

1.91%

3.15

26.95%

36.89%

MAGNUM CORPORATION BHD

23.84%

6.72

232.44%

32.28%

12.99

15.86%

18.84%

MALAYSIA AICA BHD

-12.38%

1.24

0.00%

0.00%

20.12

5.28%

5.58%

Dividend /
Company

ROA

Dividend /

Tobin's Q

Debt /

Debt /

Assets

Equities

Z score
Earning

Sales

MALAYSIAN AIRLINE SYSTEM BHD

8.47%

3.84

0.00%

0.00%

3.01

60.74%

154.69%

MALAYSIAN BULK CARRIERS BHD

24.89%

17.44

58.76%

52.62%

8.07

18.90%

23.30%

MALAYSIAN PACIFIC INDUSTRIES BHD

8.28%

17.40

60.40%

5.36%

3.84

39.23%

64.56%

MEGA FIRST CORPORATION BHD

8.09%

1.21

16.39%

1.88%

2.78

30.14%

43.14%

METACORP BHD

15.22%

0.98

6.28%

5.87%

3.36

15.17%

17.88%

MUDA HOLDINGS BHD

2.07%

0.87

33.98%

0.82%

1.55

52.11%

108.79%

MYCRON STEEL BHD

5.14%

0.70

12.33%

0.56%

1.97

41.68%

71.46%

NALURI CORPORATION BHD

0.00%

0.74

0.00%

0.00%

2.2

23.33%

30.42%

NATIONWIDE EXPRESS COURIER SERVICES

7.11%

0.88

55.58%

3.99%

10.12

6.87%

7.37%

NIKKO ELECTRONICS BHD

-30.44%

0.17

0.00%

0.00%

0.78

30.17%

43.20%

NTPM HOLDINGS BHD

11.35%

0.98

13.05%

3.35%

3.54

39.38%

64.96%

OCB BHD

0.51%

0.72

81.56%

0.40%

2.16

47.97%

92.19%

PADINI HOLDINGS BHD

16.11%

6.56

46.09%

4.57%

5.34

26.78%

36.57%

PARAMOUNT CORPORATION BHD

7.41%

2.18

29.02%

4.77%

2.71

30.74%

44.38%

PCCS GROUP BHD

2.09%

0.76

35.78%

0.50%

2.36

51.57%

106.50%

PELIKAN INT.CORPORATION BHD

6.06%

3.32

26.94%

2.10%

2.22

66.53%

198.78%

PERAK CORPORATION BHD

2.12%

0.89

13.48%

1.58%

1.63

29.68%

42.21%

PHARMANIAGA BHD

5.69%

3.24

32.04%

1.36%

2.63

58.80%

142.72%

POH KONG HOLDINGS BHD

4.38%

1.01

28.98%

1.29%

3.02

43.61%

77.34%

Dividend /
Company

ROA

Dividend /

Tobin's Q

Debt /

Debt /

Assets

Equities

Z score
Earning

Sales

POS MALAYSIA BHD

-2.70%

3.40

-172.22%

6.75%

4.2

30.94%

44.80%

PRESTAR RESOURCES BHD

4.09%

1.02

98.18%

3.93%

2.02

55.85%

126.52%

PRICEWORTH WOOD PRODUCTS BHD

4.52%

1.28

15.73%

0.75%

1.8

61.70%

161.08%

QSR BRANDS BHD

8.44%

2.10

29.91%

4.30%

2.67

39.98%

66.62%

RESORTS WORLD BHD

16.65%

33.06

15.74%

5.63%

13.33

12.26%

13.97%

SAUJANA CONSOLIDATED BHD

-1.53%

0.60

0.00%

0.00%

1.21

23.86%

31.33%

SEG INTERNATIONAL BHD

1.67%

0.65

25.23%

1.48%

0.65

49.33%

97.37%

SHANGRI-LA HOTELS (M) BHD

7.50%

2.38

33.04%

6.21%

3.67

24.62%

32.66%

SOUTH MALAYSIA INDUSTRIES BHD

2.32%

0.22

0.00%

0.00%

1.29

60.06%

150.37%

SOUTHERN ACIDS (M) BHD

3.26%

1.78

58.23%

2.22%

4.53

12.95%

14.87%

STAR PUBLICATIONS (M) BHD

10.27%

3.46

72.04%

15.12%

5.48

25.97%

35.08%

TANJONG PUBLIC LIMITED COMPANY

4.57%

2.09

46.47%

9.47%

1.4

69.68%

229.84%

TEXCHEM RESOURCES BHD

2.66%

1.28

55.40%

0.79%

2.55

66.99%

202.91%

THE STORE CORPORATION BHD

4.66%

2.81

8.26%

0.18%

3.2

59.73%

148.33%

TONG HERR RESOURCES BHD

19.06%

2.86

19.96%

2.67%

9.92

12.82%

14.71%

TOP GLOVE CORPORATION BHD

9.85%

9.32

26.65%

2.25%

5.71

39.53%

65.37%

TRADEWINDS CORPORATION BHD

1.45%

0.69

0.00%

0.00%

0.85

33.87%

51.22%

TRANSMILE GROUP BHD

-23.55%

2.05

0.00%

0.00%

1.94

62.39%

165.86%

TRC SYNERGY BHD

8.11%

1.75

8.06%

0.56%

3.67

38.88%

63.62%

Dividend /
Company

ROA

Dividend /

Tobin's Q

Debt /

Debt /

Assets

Equities

Z score
Earning

Sales

UEM WORLD BHD

7.84%

3.00

2.63%

0.28%

1.84

58.01%

138.16%

UNIMECH GROUP BHD

8.57%

1.74

16.16%

2.02%

3.62

23.28%

30.35%

UNISEM (M) BHD

6.97%

2.48

39.61%

4.85%

1.94

51.82%

107.54%

UNITED MALAYAN LAND BHD

3.76%

1.49

37.85%

4.45%

2.75

27.99%

38.87%

UPA CORPORATION BHD

7.94%

1.46

31.87%

3.49%

3.25

25.48%

34.19%

YEE LEE CORPORATION BHD

2.49%

1.10

16.42%

0.33%

1.85

59.94%

149.61%

YI-LAI BHD

8.33%

1.90

86.12%

13.49%

7.35

10.94%

12.28%

YTL CEMENT BHD

6.45%

8.68

32.01%

4.49%

2.48

45.52%

83.55%

Appendix B: Financial Status of Company (Independent Variables)

Company

Market Capital

Shares

Par Value

Sales 2007

Dividend (sen)

A & M REALTY BHD

253.91

362.73

0.5

115.93

1.1

ALUMINIUM COMPANY OF MALAYSIA BHD

138.36

134.33

395.5

5.5

AMWAY (M) HOLDINGS BHD

1060.29

164.39

584.25

40.2

212

80

154.27

18.3

ASTINO BHD

80.05

128.61

0.5

289.06

3.7

ATIS CORPORATION BHD

208.02

158.79

0.5

452.24

BINA PURI HOLDINGS BHD

66.13

82.67

612.55

3.7

BOLTON BHD

285.53

320.82

325.33

1.8

BRITISH AMERICAN TOBACCO (M) BHD

12206.41

285.53

0.5

3830.87

329

CARLSBERG BREWERY MALAYSIA BHD

1259.68

305.75

0.5

897.53

27

CHIN WELL HOLDINGS BHD

258.91

272.53

0.5

389.8

CYCLE & CARRIAGE BINTANG BHD

211.56

100.75

630.35

7.3

45

75

179.03

DAIMAN DEVELOPMENT BHD

355.52

215.01

99.81

7.3

DK LEATHER CORPORATION BHD

147.86

301.75

0.2

128.36

APOLLO FOOD HOLDINGS BHD

CYMAO HOLDINGS BHD

Company

Market Capital

Shares

Par Value

Sales 2007

Dividend (sen)

DOMINANT ENTERPRISE BHD

64.48

124

0.5

275.23

EASTERN PACIFIC INDUSTRIAL CORP. BHD

290.72

168.95

176.2

7.2

ENG KAH CORPORATION BHD

174.97

61.83

65.2

20.4

ENG TEKNOLOGI HOLDINGS BHD

148.87

119.1

500.59

ESSO MALAYSIA BHD

858.9

270

0.5

9740.49

8.8

ESTHETICS INTERNATIONAL GROUP BHD

92.4

132

0.5

124.66

4.3

FABER GROUP BERHAD

295.85

363

669.68

1.5

FACB INDUSTRIES INCORPORATED BHD

51.17

83.88

466.57

FIMA CORPORATION BHD

177.22

81.3

157.31

11

FORMOSA PROSONIC INDUSTRIES BHD

78.82

82.11

571.65

GAMUDA BHD

6286.72

2001.35

1516.36

16.8

GENTING BHD

24073.17

3703.56

0.1

8483.82

26.8

GHL SYSTEMS BHD

40.96

138.86

0.5

51.34

0.5

GRAND CENTRAL ENTERPRISES BHD

137.9

197

54.7

2.2

HAP SENG CONSOLIDATED BHD

1606.46

622.66

2244.46

40.5

HIAP TECK VENTURE BHD

523.84

327.4

0.5

1281.05

1.8

HIROTAKO HOLDINGS BHD

97.16

178.28

0.5

124.2

2.9

HOVID BHD

201.95

762.08

0.1

186.86

0.7

Company

Market Capital

Shares

Par Value

Sales 2007

Dividend (sen)

281.11

141.12

186.73

9.1

72

60

193.12

7.2

I-BHD

127.68

106.4

4.07

IGB CORP BERHAD

2324.34

1489.72

0.5

673.93

2.5

INTI UNIVERSAL HOLDINGS BHD

217.24

210.91

0.5

130.35

1.1

IPMUDA BHD

64.5

72.47

619.55

JAYCORP BHD

89.21

137.25

0.5

282.94

2.9

JOHORE TIN BHD

31.67

65.98

82.88

2.2

KENCANA PETROLEUM BHD

1398.1

902

0.1

824.28

KNM GROUP BHD

6445.47

1046.58

0.25

1230.12

1.3

KPJ HEALTHCARE BHD

644.38

207.75

1108.31

10.1

KSL HOLDINGS BHD

355.49

355.45

0.5

278.09

6.6

KUALA LUMPUR CITY CORPORATION BHD

200.76

223.07

20.35

LANDMARKS BHD

1115.18

480.68

50.5

1.5

LB ALUMINIUM BHD

106.84

248.47

0.5

318.87

1.8

LBS BINA GROUP BHD

154.08

385.19

288.39

LINGUI DEVELOPMENT BHD

890.5

659.63

0.5

1629.59

4.9

LION DIVERSIFIED HOLDINGS BHD

936.27

737.22

0.5

5171.68

2.5

HUNZA PROPERTIES BHD


HUP SENG INDUSTRIES BHD

Company

Market Capital

Shares

Par Value

Sales 2007

Dividend (sen)

MAGNI-TECH INDUSTRIES BHD

94.77

103.58

201

3.7

MAGNUM CORPORATION BHD

4801.88

1429.13

0.5

2953.07

66.7

80.82

130.36

0.5

19.8

MALAYSIAN AIRLINE SYSTEM BHD

6416.61

1670.99

14686.13

MALAYSIAN BULK CARRIERS BHD

4360

1000

0.25

608.14

32

MALAYSIAN PACIFIC INDUSTRIES BHD

1730.46

198.9

0.5

1485.33

40

MEGA FIRST CORPORATION BHD

289.45

239.21

471.81

3.7

METACORP BHD

332.85

679.28

0.5

81.03

0.7

MUDA HOLDINGS BHD

123.93

284.91

0.5

696.02

MYCRON STEEL BHD

125.3

179

482.34

1.5

NALURI CORPORATION BHD

459.88

621.47

465.35

NATIONWIDE EXPRESS COURIER SERVICES

52.9

60.12

73.88

4.9

NIKKO ELECTRONICS BHD

16.88

99.27

103.55

NTPM HOLDINGS BHD

58.8

60

125.51

OCB BHD

74.05

102.85

468.29

1.8

PADINI HOLDINGS BHD

431.59

131.58

0.5

316.87

11

PARAMOUNT CORPORATION BHD

234.57

107.56

300.08

13.3

PCCS GROUP BHD

45.61

60.01

417.05

3.5

MALAYSIA AICA BHD

Company

Market Capital

Shares

Par Value

Sales 2007

Dividend (sen)

956.39

288.07

1194.99

8.7

88.5

100

113.79

1.8

PHARMANIAGA BHD

346.56

106.96

1183.98

15

POH KONG HOLDINGS BHD

207.23

410.35

0.5

414.24

1.3

POS MALAYSIA BHD

912.45

536.74

0.5

859.33

10.8

PRESTAR RESOURCES BHD

92.3

180.98

0.5

455.76

9.9

PRICEWORTH WOOD PRODUCTS BHD

87.9

137.86

0.5

549.12

QSR BRANDS BHD

601.4

286.38

466.38

19274.56

5830.12

0.1

4352.33

4.2

SAUJANA CONSOLIDATED BHD

66.05

110.09

70.97

SEG INTERNATIONAL BHD

55.21

84.94

86.3

1.5

SHANGRI-LA HOTELS (M) BHD

1047.2

440

410.73

5.8

SOUTH MALAYSIA INDUSTRIES BHD

45.14

209.94

204.85

SOUTHERN ACIDS (M) BHD

243.74

136.93

370.16

STAR PUBLICATIONS (M) BHD

2555.43

738.56

805.87

16.5

TANJONG PUBLIC LIMITED COMPANY

6331.12

403.26

7.5

2721.65

63.9

TEXCHEM RESOURCES BHD

158.85

124.1

1258.57

THE STORE CORPORATION BHD

192.5

68.5

1948.32

5.1

PELIKAN INT.CORPORATION BHD


PERAK CORPORATION BHD

RESORTS WORLD BHD

Company

Market Capital

Shares

Par Value

Sales 2007

Dividend (sen)

TONG HERR RESOURCES BHD

364.46

127.43

487.68

10.2

TOP GLOVE CORPORATION BHD

1402.03

300.73

0.5

1228.78

9.2

TRADEWINDS CORPORATION BHD

763.16

1106.02

417.17

TRANSMILE GROUP BHD

553.74

270.12

616.23

TRC SYNERGY BHD

244.88

139.8

422.07

1.7

UEM WORLD BHD

4164.26

1388.09

6978.67

1.4

UNIMECH GROUP BHD

107.88

123.91

0.5

110.58

1.8

UNISEM (M) BHD

584.59

471.44

0.5

972.48

10

UNITED MALAYAN LAND BHD

360.07

241.65

396.77

7.3

UPA CORPORATION BHD

97.14

66.54

139.29

7.3

YEE LEE CORPORATION BHD

68.97

62.7

507.9

2.7

152

160

0.5

112.65

9.5

2038.09

469.61

0.5

1150.04

11

YI-LAI BHD
YTL CEMENT BHD

Appendix C: Management and Ownership of Company


Total Board

Independent

Member

Board

A & M REALTY BHD

ALUMINIUM COMPANY OF MALAYSIA BHD

Company

Widely Held

CEO Duality

AMWAY (M) HOLDINGS BHD

APOLLO FOOD HOLDINGS BHD

ASTINO BHD

ATIS CORPORATION BHD

BINA PURI HOLDINGS BHD

BOLTON BHD

12

BRITISH AMERICAN TOBACCO (M) BHD

CARLSBERG BREWERY MALAYSIA BHD

CHIN WELL HOLDINGS BHD

10

CYCLE & CARRIAGE BINTANG BHD

11

CYMAO HOLDINGS BHD

DAIMAN DEVELOPMENT BHD

Total Board

Independent

Member

Board

DK LEATHER CORPORATION BHD

DOMINANT ENTERPRISE BHD

Company

Widely Held

CEO Duality

EASTERN PACIFIC INDUSTRIAL CORP. BHD

10

ENG KAH CORPORATION BHD

ENG TEKNOLOGI HOLDINGS BHD

11

ESSO MALAYSIA BHD

ESTHETICS INTERNATIONAL GROUP BHD

FABER GROUP BERHAD

FACB INDUSTRIES INCORPORATED BHD

FIMA CORPORATION BHD

FORMOSA PROSONIC INDUSTRIES BHD

GAMUDA BHD

14

GENTING BHD

GHL SYSTEMS BHD

GRAND CENTRAL ENTERPRISES BHD

Total Board

Independent

Member

Board

HAP SENG CONSOLIDATED BHD

10

HIAP TECK VENTURE BHD

Company

Widely Held

CEO Duality

11

HIROTAKO HOLDINGS BHD

HOVID BHD

HUNZA PROPERTIES BHD

HUP SENG INDUSTRIES BHD

10

I-BHD

IGB CORP BERHAD

13

INTI UNIVERSAL HOLDINGS BHD

IPMUDA BHD

JAYCORP BHD

10

JOHORE TIN BHD

KENCANA PETROLEUM BHD

KNM GROUP BHD

KPJ HEALTHCARE BHD

Total Board

Independent

Member

Board

KSL HOLDINGS BHD

KUALA LUMPUR CITY CORPORATION BHD

Company

Widely Held

CEO Duality

LANDMARKS BHD

LB ALUMINIUM BHD

LBS BINA GROUP BHD

LINGUI DEVELOPMENT BHD

LION DIVERSIFIED HOLDINGS BHD

MAGNI-TECH INDUSTRIES BHD

MAGNUM CORPORATION BHD

MALAYSIA AICA BHD

MALAYSIAN AIRLINE SYSTEM BHD

12

MALAYSIAN BULK CARRIERS BHD

MALAYSIAN PACIFIC INDUSTRIES BHD

MEGA FIRST CORPORATION BHD

METACORP BHD

Total Board

Independent

Member

Board

MUDA HOLDINGS BHD

MYCRON STEEL BHD

Company

Widely Held

CEO Duality

NALURI CORPORATION BHD

NATIONWIDE EXPRESS COURIER SERVICES

NIKKO ELECTRONICS BHD

11

NTPM HOLDINGS BHD

OCB BHD

PADINI HOLDINGS BHD

PARAMOUNT CORPORATION BHD

PCCS GROUP BHD

PELIKAN INT.CORPORATION BHD

PERAK CORPORATION BHD

PHARMANIAGA BHD

11

POH KONG HOLDINGS BHD

10

POS MALAYSIA BHD

Total Board

Independent

Member

Board

PRESTAR RESOURCES BHD

PRICEWORTH WOOD PRODUCTS BHD

Company

Widely Held

CEO Duality

QSR BRANDS BHD

RESORTS WORLD BHD

SAUJANA CONSOLIDATED BHD

SEG INTERNATIONAL BHD

10

SHANGRI-LA HOTELS (M) BHD

12

SOUTH MALAYSIA INDUSTRIES BHD

SOUTHERN ACIDS (M) BHD

STAR PUBLICATIONS (M) BHD

10

TANJONG PUBLIC LIMITED COMPANY

TEXCHEM RESOURCES BHD

THE STORE CORPORATION BHD

TONG HERR RESOURCES BHD

TOP GLOVE CORPORATION BHD

Total Board

Independent

Member

Board

TRADEWINDS CORPORATION BHD

TRANSMILE GROUP BHD

Company

Widely Held

CEO Duality

TRC SYNERGY BHD

UEM WORLD BHD

UNIMECH GROUP BHD

UNISEM (M) BHD

UNITED MALAYAN LAND BHD

UPA CORPORATION BHD

YEE LEE CORPORATION BHD

YI-LAI BHD

YTL CEMENT BHD

15

Appendix D: TDI, TDI-Board, TDI-Disclosure, and TDI-Shareholders


Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

A & M REALTY BHD

15

ALUMINIUM COMPANY OF MALAYSIA BHD

15

AMWAY (M) HOLDINGS BHD

16

APOLLO FOOD HOLDINGS BHD

17

ASTINO BHD

14

ATIS CORPORATION BHD

16

BINA PURI HOLDINGS BHD

16

BOLTON BHD

18

BRITISH AMERICAN TOBACCO (M) BHD

21

CARLSBERG BREWERY MALAYSIA BHD

18

CHIN WELL HOLDINGS BHD

16

CYCLE & CARRIAGE BINTANG BHD

19

CYMAO HOLDINGS BHD

12

Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

DAIMAN DEVELOPMENT BHD

15

DK LEATHER CORPORATION BHD

15

DOMINANT ENTERPRISE BHD

15

EASTERN PACIFIC INDUSTRIAL CORP. BHD

16

ENG KAH CORPORATION BHD

15

ENG TEKNOLOGI HOLDINGS BHD

16

ESSO MALAYSIA BHD

18

ESTHETICS INTERNATIONAL GROUP BHD

17

FABER GROUP BERHAD

18

FACB INDUSTRIES INCORPORATED BHD

14

FIMA CORPORATION BHD

15

FORMOSA PROSONIC INDUSTRIES BHD

13

GAMUDA BHD

16

GENTING BHD

20

Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

GHL SYSTEMS BHD

18

GRAND CENTRAL ENTERPRISES BHD

13

HAP SENG CONSOLIDATED BHD

19

HIAP TECK VENTURE BHD

14

HIROTAKO HOLDINGS BHD

12

HOVID BHD

13

HUNZA PROPERTIES BHD

15

HUP SENG INDUSTRIES BHD

16

I-BHD

15

IGB CORP BERHAD

18

INTI UNIVERSAL HOLDINGS BHD

13

IPMUDA BHD

14

JAYCORP BHD

15

JOHORE TIN BHD

12

Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

KENCANA PETROLEUM BHD

16

KNM GROUP BHD

16

KPJ HEALTHCARE BHD

19

KSL HOLDINGS BHD

18

KUALA LUMPUR CITY CORPORATION BHD

12

LANDMARKS BHD

18

LB ALUMINIUM BHD

19

LBS BINA GROUP BHD

15

LINGUI DEVELOPMENT BHD

19

LION DIVERSIFIED HOLDINGS BHD

18

MAGNI-TECH INDUSTRIES BHD

15

MAGNUM CORPORATION BHD

18

MALAYSIA AICA BHD

15

MALAYSIAN AIRLINE SYSTEM BHD

20

Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

MALAYSIAN BULK CARRIERS BHD

16

MALAYSIAN PACIFIC INDUSTRIES BHD

16

MEGA FIRST CORPORATION BHD

16

METACORP BHD

17

MUDA HOLDINGS BHD

16

MYCRON STEEL BHD

18

NALURI CORPORATION BHD

13

20

NIKKO ELECTRONICS BHD

13

NTPM HOLDINGS BHD

18

OCB BHD

18

PADINI HOLDINGS BHD

17

PARAMOUNT CORPORATION BHD

20

NATIONWIDE EXPRESS COURIER SERVICES


BHD

Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

PCCS GROUP BHD

13

PELIKAN INT.CORPORATION BHD

20

PERAK CORPORATION BHD

15

PHARMANIAGA BHD

19

POH KONG HOLDINGS BHD

15

POS MALAYSIA BHD

17

PRESTAR RESOURCES BHD

15

PRICEWORTH WOOD PRODUCTS BHD

11

QSR BRANDS BHD

19

RESORTS WORLD BHD

19

SAUJANA CONSOLIDATED BHD

14

SEG INTERNATIONAL BHD

21

SHANGRI-LA HOTELS (M) BHD

18

SOUTH MALAYSIA INDUSTRIES BHD

13

Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

SOUTHERN ACIDS (M) BHD

16

STAR PUBLICATIONS (M) BHD

15

TANJONG PUBLIC LIMITED COMPANY

19

TEXCHEM RESOURCES BHD

17

THE STORE CORPORATION BHD

12

TONG HERR RESOURCES BHD

17

TOP GLOVE CORPORATION BHD

19

TRADEWINDS CORPORATION BHD

15

TRANSMILE GROUP BHD

15

TRC SYNERGY BHD

14

UEM WORLD BHD

19

UNIMECH GROUP BHD

15

UNISEM (M) BHD

17

UNITED MALAYAN LAND BHD

18

Company

TDI

TDI Board

TDI Disclosure

TDI Shareholding

UPA CORPORATION BHD

16

YEE LEE CORPORATION BHD

14

YI-LAI BHD

14

YTL CEMENT BHD

18

You might also like