The Determinants of Corporate Board Size and Independence: Evidence from Malaysia

36 Pages Posted: 9 Oct 2012

See all articles by Laurent Germain

Laurent Germain

Toulouse University, Toulouse Business School

Nadine Galy

Toulouse Business School - Economics and Finance

Wanling Lee

Toulouse Business School

Date Written: June 7, 2012

Abstract

Board of directors has gained much attention in improving corporate governance in recent years. Many reforms have been done to ensure that board of directors is effective. In general, the codes of good governance in many countries, including developed and developing markets call for greater independent directors in the board. In Malaysia specifically, Malaysian Code on Corporate Governance codified the best practices of good governance and described optimal corporate governance structures. All these reforms show the importance of composition of boards in playing their role as advisors and monitors to the management activities. Our study investigates the determinants of board structure for Malaysian firms from year 2000 to 2007 by grouping the existing theory into 2 hypotheses. We also examine corporate board structure trends and the compliance level of board of directors in Malaysia with the requirement in Malaysian Code on Corporate Governance. Overall, we find that the board independence shows an upward trend throughout the years. Our results also suggest that board size is correlated with the operation level of the firms and the measures in monitoring costs to determine the board independence are consistent with the monitoring hypothesis prediction.

Keywords: corporate governance, board structure, Malaysian Code on Corporate Governance

JEL Classification: G30, G38

Suggested Citation

Germain, Laurent and Galy, Nadine and Lee, Wanling, The Determinants of Corporate Board Size and Independence: Evidence from Malaysia (June 7, 2012). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2083641 or http://dx.doi.org/10.2139/ssrn.2083641

Laurent Germain

Toulouse University, Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31000
France

Nadine Galy

Toulouse Business School - Economics and Finance ( email )

20 Boulevard Lascrosses
Toulouse, 31400
France

Wanling Lee (Contact Author)

Toulouse Business School ( email )

20, bd Lascrosses
Toulouse, 31068
France

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