Corporate Governance Legal Reforms and Stock Return in Malaysia

37 Pages Posted: 19 Jan 2010 Last revised: 7 Jul 2010

See all articles by Grace Ooi

Grace Ooi

University of Auckland - Department of Accounting and Finance

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: January 15, 2010

Abstract

This paper examines the relationship between the changes in corporate governance legal system and stock return in Bursa Malaysia (formally known as Kuala Lumpur Stock Exchange, KLSE) in Malaysia for the period from 1996 to 2003. The cross-sectional evidence indicates that the corporate governance is positively associated with stock return before the Asian financial melt down, but there is no evidence of such connection during the 1997 crisis. After the crisis, an implementation of Financial Reporting Act in 1997 and the Code on Corporate Governance in 2000 combined with a revise of Kuala Lumpur Stock Exchange (KLSE) regulations in 2001 have restored the investors’ confidence and enhanced the investor’s awareness and realization of the value of good corporate governance. This study supports a proposition that the changes in legal system have improved the corporate governance in Malaysia.

Keywords: Corporate Governance, Legal Reforms, Malaysia

JEL Classification: G32, G34

Suggested Citation

Ooi, Bee-Wah Grace and Visaltanachoti, Nuttawat, Corporate Governance Legal Reforms and Stock Return in Malaysia (January 15, 2010). Finance and Corporate Governance Conference 2010 Paper, Available at SSRN: https://ssrn.com/abstract=1536912 or http://dx.doi.org/10.2139/ssrn.1536912

Bee-Wah Grace Ooi (Contact Author)

University of Auckland - Department of Accounting and Finance ( email )

Private Bag 92019
Auckland 1001
New Zealand

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

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