Board Effectiveness and Company Performance in Malaysian Companies

Abstract

The separation of ownership and control in companies limits the involvement of shareholders in management decision-making. Therefore, shareholders have to rely on the board of directors to evaluate and challenge management decisions. The way a board discharges their duties is referred to as the board process. This study examines the relationship between board process and company performance of Malaysian public listed companies. This study used two types of data; a questionnaire survey of Malaysian directors and data derived from company annual reports from 2007 to 2009. Based on a sample of 175 companies, the findings of the study reveal that board’s risk oversight and performance of independent directors are positively correlated to company performance. However, CEO performance evaluation and directors’ accessibility to information have no effect on company performance. Overall findings are expected to serve as a basis for more effective corporate governance policies and practices in Malaysia in ensuring the sustainability of the listed companies.