Board Structure, Directors’ Remuneration Disclosure Level and Firm Value in Malaysia
DOI:
https://doi.org/10.15282/jgi.6.1.2023.8827Keywords:
corporate governance, disclosure, board structure, board independence, firm valueAbstract
This study aims to determine the impact of corporate governance mechanism on the directors' remuneration disclosure level and firm value. Data were collected from annual reports of 200 selected companies listed in Bursa Malaysia from 2013 to 2019. Pooled OLS, longitudinal data and 2SLS was carried out to accomplish the objective. The results show that board independence significantly impact the directors’ remuneration disclosure level while CEO duality and board size are insignificant on the directors’ remuneration disclosure level. Another finding revealed that directors’ remuneration disclosure level and board size were significant in affecting the firm value. It was also found that directors’ remuneration disclosure does not mediated the relationship between board structure and firm value. This finding deserves the attention of the stakeholders, investors, policymakers, and organizations in modelling a high-level disclosure and governance structure in the corporate environment in enhancing firm value.
References
Abdul Hadi, I., & Hanefah, M. M. (2014). Board Diversity and Corporate Social Responsibility in Jordan. In 3rd Conference on Management, Economics and Finance (pp. 1-18).
Abdullah, M., Evans, L., Fraser, I., & Tsalavoutas, I. (2015). IFRS Mandatory disclosures in Malaysia: the influence of family control and the value (ir)relevance of compliance levels. Accounting Forum, 39(4), 328-348.
Al Mamun, A., & Mansor, S.A. (2013). EVA as Superior Performance Measurement Tool. Journal of Economic Development, Management, It, Finance and Marketing, 5(2), 100-110.
Al-Akra, M. and Ali, M. J. (2012) ‘The value relevance of corporate voluntary disclosure in the Middle-East: The case of Jordan’, Journal of Accounting and Public Policy. Elsevier Inc., 31(5),. 533–549.
Arye, L. et al. (2003) ‘Executive Compensation as an Agency Problem’, Journal of Economic Perspectives, 3(3), pp. 71–92.
Azmi, N. A., Sata, A., Hanim, F., Abdullah, N., Ab Aziz, N. H., & Ismail, I. S. (2021). Institutional investors ownership and firm value: evidence from Malaysia. Asia-Pasific Management Accounting Journal, 16(1), 1-20.
Baron, R. M., & Kenny, D. A. (1986). The Moderator-Mediator Variable Distinction in Social Psychological Research: Conceptual, Strategic and Statistical Considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182.
Barus, A. C., & Setiawati, K. (2015). Pengaruh asimetri informasi, mekanisme corporate governance, dan beban pajak tangguhan terhadap manajemen laba. Jurnal Wira Ekonomi Mikroskil, 5(1), 31-40.
Bel-Oms, I., & Segarra-Moliner, J. R. (2022). How Do Remuneration Committees Affect Corporate Social Responsibility Disclosure? Empirical Evidence from an International Perspective. Sustainability, 14(2), 860.
Bidhari, S. C., & Siti Aisjah, U.S. (2013). Effect of Corporate Social Responsibility Information Disclosure on Financial Performance and Firl Value in Banking Industry Listed at Indonesia Stock Exchange. European Journal of Business and Management Vol.5, No.18, 2013, 5(18), 39-47.
Botosan, C. a. and Plumlee, M. a. (2002) ‘A Re-examination of Disclosure Level and the Expected Cost of Equity Capital’, Journal of Accounting Research, 40(1), 21–40.
Bowrin, A.R. (2013). Corporate social and environmental reporting in the Carribean. Social Responsibility Journal, 9(2), 259-280. http://doi.org.10.1108/SRJ-08-2011-0074
Branco, M. C., Rodrigues, L. L. (2008). Factors influencing social responsibility disclosure by Portuguese companies. Journal of Business Ethics, 83(4), 685-701.
Castro, I., Galán, J. L., & Casanueva, C. (2016). Management of alliance portfolios and the role of the board of directors. Journal of Business Economics and Management, 17(2), 215-233.
Chaghadari, M. F. (2011). Corporate Governance and Firm Performance. In 2011 International Conference on Sociality and Economic Development (Vol. 10, pp. 484-489).
Chau, G. and Gray, S. J. (2010) ‘Family ownership, board independence and voluntary disclosure: Evidence from Hong Kong’, Journal of International Accounting, Auditing and Taxation. Elsevier Inc., 19(2), 93–109.
Cheng, E. C. M. and Courtenay, S. M. (2006) ‘Board composition, regulatory regime and voluntary disclosure’, International Journal of Accounting, 41(3), 262–289.
Cuadrado-ballesteros, B. (2015). The role of independent directors at family firms in relation to corporate social responsibility disclosures. International Business Review, 24, 890-901.
El-Deeb, M. S., Halim, Y. T., & Elbayoumi, A. F. (2021). Disclosure tone, corporate governance and firm value: evidence from Egypt. Asia-Pacific Journal of Accounting & Economics, 1-22.
Fauzi, F., Locke, S. (2012). Board structure, ownership structure and firm performance: a study of New Zealand listed-firms. Asian Academy of Management Journal of Accounting and Finance, 8(2).
Forum for a new World Governance (2011) World Governance Index.
Garcia-meca, E., Garcia-sanchez, I., & Martinez-ferrero, J. (2015). Board diversity and its effects on banks performance: An international analysis. Journal of Banking & Finance, 53, 202-214.
Ganguli, S. K., & Deb, S. G. (2021). Board composition, ownership structure and firm performance: New Indian evidence. International Journal of Disclosure and Governance, 1-13.
Gibbins, M., Richardson, A., & Waterhouse, J. (1990). The Management of Corporate Financial Disclosure: Opportunism, Ritualism, Policies, and Processes. Journal of Accounting Research, 28(1), 121-143.
Haniffa, R. M. and Cooke, T. E. (2002) ‘Culture , Corporate Governance and Disclosure in Malaysian Corporations’, Abacus, 38(3), 317–349.
Haniffa, R. M. and Cooke, T. E. (2005) ‘The impact of culture and governance on corporate social reporting’, Journal of Accounting and Public Policy, 24(5), 391–430.
Haniffa, R., & Hudaib, M. (2006). Corporate Governance Structure and Performance of Malaysian Listed Companies. Journal of Business Finance & Accounting, 33(7-8), 1034-1062.
Haryati, R., & Cahyati, A. (2015). Pengaruh good corporate governance (gcg) terhadap earnings management pada perusahaan yang terdaftar di jakarta islamic index (JII). JRAK, 6(1), 16-37.
Hassan, O. A., Romilly, P., Giorgioni, G., & Power, D. (2009). The value relevance of disclosure: Evidence from the emerging capital market of Egypt. The International Journey of Accounting, 44(1), 79-102.
Hermalin, B.E., & Weisbach, M.s. (2012). Information Disclosure and Corporate. The Journal of Finance, LXVII(1).
Ho, P.L. and Taylor, G. (2013) ‘Corporate governance and different types of voluntary disclosure: Evidence from Malaysian listed firms’, Pacific Accounting Review, 25(1), 4–29.
Johan, S. (2022) Corporate Governance Principles in Sovereign Wealth Fund (The Case of Indonesia Sovereign Wealth Fund).
Karim, S. (2021). An investigation into the remuneration–CSR nexus and if it can be affected by board gender diversity. Corporate Governance: The International Journal of Business in Society.
Katmon, N., & Farooque, O. Al. (2015). Exploring the Impact of Internal Corporate Governance on the Relation Between Disclosure Quality and Earnings Management in the UK Listed Companies. Journal of Business Ethics.
Khalid, A. A. (2018). Determinants and impacts of directors' remuneration disclosure: evidence from Malaysian FTSE30 companies (Doctoral dissertation, Brunel University London).
Khana, N., Shafqatb, M. M., & Qureshic, S. A. (2021). CEO Duality and Firm Performance in the Pharmaceutical Industry of China: The Moderating Role of Ownership Type
Kinkel, T. (2014). Board diversity and firm performance. University van Amsterdam.
Liu, X., & Anbumozhi, V. (2009). Determinant factors of corporate environmental information disclosure: an empirical study of Chinese listed companies. Journal of Cleaner Production, 17(6), 593-600.
Malaysian Institute of Corporate Governance (MICG) (2021). micg.org.my
Malak, S. S. D. A. (2012) The Impact of Changes in Malaysian Regulatory Framework on the Disclosure of Executive Directors’ Remuneration.
Mallin, C., Farag, H., & Ow-Yong, K. (2014). Corporate social responsibility and financial performance in Islamic banks. Journal of Economic Behavior & Organization, 103(March 2013), 1-18.
Mohd Ghazali, N. a. and Weetman, P. (2006) ‘Perpetuating traditional influences: Voluntary disclosure in Malaysia following the economic crisis’, Journal of International Accounting, Auditing and Taxation, 15, 226–248.
Mohd Nor, M., Shafee, N.B., & Samsuddin, N. (2014). Board Characteristics and Malaysian Firm Performance, Global Journal of Business Research in Accounting, Auditing and Business Etchics, (3), 139-147.
Muslu, V. (2010) ‘Executive Directors , Pay Disclosures , and Incentive Compensation in Large European Companies’, Journal of Accounting, Auditing & Finance, 25, 569–605.
Nasution, N., Putri, D. H., & Faruqi, F. (2020.). The Effect of Asymmetry Information and Corporate Governance Mechanism on Earning Management in Companies Listed in the Islamic Index Period of Jakarta 2015–2018. Proceedings of the Annual International Conference on Accounting Research (AICAR 2019) (pp. 78-81). Atlantic Press.
Oh, E. (2003), "In pursuit of transparency", The Star (Bizweek), 18, 5.
Prihatiningtias, Y. W. (2012). Gender diversity in the boardroom and firm performance: evidence from Indonesian publicly listed financial firms. University of Cranberra.
Rakshit, D., Mitra, S., & Kurmi, M. K. (2017). EVA verses Traditional Accounting-based Financial Performance Measures: An Evaluation of Relative and Incremental Information Content in explaining Variation in Stock Return.
Reguera-Alvarado, N., & Bravo-Urquiza, F. (2020). The impact of board diversity and voluntary risk disclosure on financial outcomes. A case for the manufacturing industry. Gender in Management: An International Journal.
Riaz, Z., Ray, S., Ray, P. K., & Kumar, V. (2015). Disclosure practices of foreign and domestic firms in Australia. Journal of World Business, 50(4), 781-792.
Saeed, S., Basiruddin, R., & Rasid, S. Z. A. (2015). The Mediating Role of Intellectual Capital in Corporate Governance and the Corporate Performance Relationship. Mediterranean Journal of Social Sciences, 6(5), 209-219.
Sekaran, U. and Bougie, R. (2013) Research Methods for Business: A Skill-Building Approach. 6th Edition, Wiley, New York.Shehata, N. F., Salhin, A., & El-Helaly, M. (2017). Board diversity and firm performance: evidence from the U.K. SMEs. Applied Economics, 49.
Sheu, H.-J., Chung, H. and Liu, C.-L. (2010) ‘Comprehensive Disclosure of Compensation and Firm Value: The Case of Policy Reforms in an Emerging Market’, Journal of Business Finance & Accounting, 37(9–10), 1115–1144.
Torres, P., & Augusto, M. (2021). Attention to social issues and CEO duality as enablers of resilience to exogenous shocks in the tourism industry. Tourism Management, 87, 104400
Verrecchia, R. E. (2001) ‘Essays on disclosure’, Journal of Accounting and Economics, 32(1–3), 97–180.
Weisbach, S. M. (1988). Outside directors and CEO turnover. Journal of Financial Economics, 20, 431-460
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 University Malaysia Pahang Publishing
This work is licensed under a Creative Commons Attribution 4.0 International License.
