Nomination Commitee Attributes and Firm Performance: Evidence from Finance Companies in Malaysia

Basiru Salisu KALLAMU

Abstract


Abstract. The paper examines the impact of nomination committee attributes on the performance of finance companies in Malaysia. Our panel data is composed of annual data for finance companies listed on the main market of Bursa Malaysia over the period 2004 to 2011. The result indicates that finance expertise of directors’ on nomination committee influences accounting returns positively while membership of executive on nomination committee affects accounting returns negatively. This indicates that the requirement of Bank Negara that nomination committee should be composed of non-executive directors is appropriate and suggests that the regulators should recommend companies to include directors with finance expertise in the nomination committee in future policy formulation.

Keywords. Nomination committee, independent directors, finance companies, firm performance.

JEL. E62, H54, O40.

Keywords


Nomination committee, independent directors, finance companies, firm performance

Full Text:


References


Akhigbe, A., & Martin, A.D. (2006). Valuation impact of Sarbanes-Oxley: Evidence from disclosure and governance within the financial services industry, Journal of Banking and Finance, 30(3), 989-1006. doi. 10.1016/j.jbankfin.2005.06.002

Aldamen, H., Duncan, K., Kelly, S., McNamara, R. & Nagel, S. (2012). Audit committee characteristics and firm performance during the global financial crisis, Accounting and Finance, 52(4), 971-1000. doi. 10.1111/j.1467-629X.2011.00447.x

Atik, J. (2009). Basel II and extreme risk analysis, Loyla Law School, Legal Studies Paper No. 2010-40. doi. 10.2139/ssrn.1677682

Becht, M., Bolton, P., & Roell, A. (2011). Why bank corporate governance is different, Oxford Review of Economic Policy, 27(3), 437-463. doi. 10.1093/oxrep/grr024

Berle, A.A. Jr. & Means, G.C. (1932) The Modern Corporation and Private Property, MacMillan, New York.

Bhandari, S.B. (2010). Ethical Dilemma off Nonprofits in the agency theory framework, Journal of Leadership Accountability and Ethics, 8(2), 33-40.

Boyd, K.B., Haynes, K.T. and Zona. F. (2011). Dimensions of CEO–Board Relations, Journal of Management Studies, 48(8), 1892-1923. doi. 10.1111/j.1467-6486.2010.00943.x

Bozec, R., & Dia, M. (2005). Board structure and firm technical efficiency: Evidence from Canadian state-owned enterprises, European Journal of Operational Research, 177(3), 1734-1750. doi. 10.1016/j.ejor.2005.10.001

Carcello, J.V., Hermanson, D.R. & Ye, Z.S. (2011). Corporate governance research in accounting and auditing: insights, practice implications, and future research directions, Auditing: A Journal of Practice and Theory, 30(3), 1-31. doi. 10.2308/ajpt-10112

Carson, E. (2002). Factors associated with the development of board sub-committees, Corporate Governance: An International Review, 10(1), 4-18. doi. 10.1111/1467-8683.00263

Chhaochharia, V., Kumar, A., & Niessen-Ruenzi, A. (2012). Local investors and corporate Governance, Journal of Accounting and Economics, 54, 42-67. doi. 10.1016/j.jacceco.2012.03.002

Chhaochharia, V., & Grinstein, Y. (2009). CEO compensation and board structure, The Journal of Finance, 64(1), 231-261. doi. 10.1111/j.1540-6261.2008.01433.x

Cuevas-Rodriquez, G., Gomez-Mejia, L.R., & Wiseman, R.M. (2012). Has agency theory run its course? Making the theory more flexible to inform the management of reward system, Corporate Governance: An International Review, 20(6), 526-546. doi. 10.1111/corg.12004

Dionne, G. & Triki, T. (2005). Risk management and corporate governance: The importance of independence and financial knowledge for the board and audit committee, Working Paper, 05-15. Available at http://www.his.se/PageFiles/17648/riskmanagementandgovernancepaper2005.pdf Accessed on 03/04/2012.

Eminet, A., & Guedri, Z. (2010). The role of nominating committees and director reputation in shaping the labor market for Directors: An empirical assessment, Corporate Governance: An International Review, 18(6), 557-574. doi. 10.1111/j.1467-8683.2010.00814.x

Ferreira, C. (2008). The banking sector, economic growth and European integration,”Journal of Economic Studies, 3(6), 512-527. doi. 10.1108/01443580810916532

Garay, U., & Gonzalez, M. (2008). Corporate governance and firm value: The case of Venezuela,”Corporate Governance, 16(3), 194-209. doi. 10.1111/j.1467-8683.2008.00680.x

Garcia-Herrero, A., Gavila, S., & Santabarbara, D. (2009). What explains the low profitability of Chinese banks? Journal of Banking and Finance, 33(11), 2080–2092. doi. 10.1016/j.jbankfin.2009.05.005

Harrison, J.R. (1987). The strategic use of corporate board committees, California Management Review, 30(1), 109-125. doi. 10.2307/41165269

Jiraporn, P., Manohar, S., & Lee, C.I. (2009). Ineffective corporate governance: Director busyness and board committee memberships, Journal of Banking & Finance, 33(5), 819-828. doi. 10.1016/j.jbankfin.2008.09.020

Karamanou, I., & Vefeas, N. (2005). The Association between Corporate Boards, Audit Committees and Management Earnings Forecasts: An Empirical Analysis, Journal of Accounting Research, 43(3), 453-486. doi. 10.1111/j.1475-679X.2005.00177.x

Kashyap, A., Rajan, R. & Stein, J. (2008). Rethinking capital regulation” Available at http://scholar.harvard.edu/sites/scholar.iq.harvard.edu/files/stein/files/kashyaprajanstein.03.12.09.pdf. Accessed on 12/03/2012.

Kim, P.K., & Rasiah, D. (2010). Relationship between corporate governance and bank performance in Malaysia during the pre and post Asian financial crisis, European Journal of Economics, Finance and Administrative Sciences, 21, 39-63.

Klein, A. (1998). Firm Performance and Board Committee Structure, Journal of Law and Economics, 41(1), 275-303. doi. 10.1086/467391

Malaysian code on corporate governance (2012). Available at http://www.sc.com.my/eng/html/cg/cg2012.pdf accessed 03/7/2011

Moosa, I. (2008). Anatomy of the subprime financial crisis, Monash Business Review, 4(1), 1-7.

Ntim, C.G. (2009). Internal corporate governance structures and firm financial performance: Evidence from South African listed companies, Unpublished PhD Thesis, University of Glasgow.

Patton, A. & Baker, J. (1987). Why do not directors rock the boat? Harvard Business Review, 65, 10-12.

Pearce, J.A. & Zahra, S.A. (1991). The relative power of CEOs and board of directors: association with corporate performance, Strategic Management Journal, 12(2), 135-153. doi. 10.1002/smj.4250120205

Raber, R.W. (2003). The role of good corporate governance in overseeing risk, Corporate Governance Advisor, 11(2), 11-16.

Shivdasani, A., & Yermack, D. (1999). CEO involvement in the selection of new board members: An empirical analysis, The Journal of Finance, 54(5), 1829-1853. doi. 10.1111/0022-1082.00168

Soomro, R.B, Gilal R.G., & Jatoi M.M. (2011). Examining the impact of human resources management (HRM) practices on employees performance: A case study of Pakistani commercial banking sector, Interdisciplinary Journal of Contemporary Research In Business, 3(1), 865-878.

Sufian, F. & Habibullah, M.S(2010). Does economic freedom fosters bank’s performance? Panel evidence from Malaysia, Journal of Contemporary Accounting and Economics, 6(1), 77-91. 10.1016/j.jcae.2010.09.003

Tao, N.B., & Hutchinson, M. (2012). Corporate governance and risk management committee: The role risk management and compensation committees. Financial markets and Corporate Governence Conference. doi. 10.2139/ssrn.1979895

Vefeas, N. (1999). Board meeting frequency and firm performance, Journal of Financial Economics, 53, 113-142. doi. 10.1016/S0304-405X(99)00018-5

Vefeas, N., & Theodorou, E. (1998). The relationship between board structure and firm performance in the UK, British Accounting Review, 30(4), 383-407. doi. 10.1006/bare.1998.0075

Yeh, Y-H., Chung, H. & Liu, C-L. (2011). Committee independence and financial institution performanceduring the 2007-2008 credit crunch: Evidence from a multi-country study, Corporate Governance: An International Review, 19(5), 437-458. doi. 10.1111/j.1467-8683.2011.00884.x

Zulkifli, A., & Abdul Samad, F. (2007). Corporate governance and performance of banking firms: Evidence from Asian emerging markets, In Mark Hirschey, Kose John, Anil K. Makhija (Ed.) Issues in Corporate Governance and FinanceAdvances in Financial Economics, 12, (pp. 49-74), Emerald Group Publishing Limited.




DOI: http://dx.doi.org/10.1453/jest.v3i1.626

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Journal of Economic and Social Thought - J. Econ. Soc. Thoug. - JEST - www.kspjournals.org

ISSN: 2149-0422

Editor: jest@ksplibrary.org   Secretarial: secretarial@ksplibrary.org   Istanbul - Turkey.

Copyright © KSP Library