Chapter 1: Introduction

Background of the Study

Every company is led by a board that is collectively responsible for setting and achieving

company goals and objectives. The chairman of the board provides leadership to both the

company and the board. He has the critical role of ensuring that the Board carries out its

responsibilities. Under the Code of Corporate Governance in place as of April 2021, the

Chairman of the Board is responsible for ensuring effective governance, leadership, and

performance of the board. A chairman of the board should not be a member of any committees,

including the Audit Committee, Nomination Committee, and Remuneration Committee. Agents

or directors may not continuously act within the best intrigued of shareholders when the control

of a company is partitioned from its possession. A revised version of MCCG stated that the

Chairman of the Board should not be a member of the Nomination Committee. The focus of this

study is on the relationship between Chairman independence and the firm's performance based

on ROE and ROA from 2017-2021.

Problem Statement

The evidence suggests that corporate governance influences the firm's performance (Fama, 1980;

Fama & Jensen, 1983). Corporate governance practices and firm performance have been studied,

but mixed results have been found. Malaysia's Malaysian Code does not seem to have any clear

effect on corporate governance or performance as of today. This paper attempts to shed light on

this issue as well as to better understand the effect of the crisis in the aftermath of the above-

mentioned crisis on firms' performance by providing empirical evidence over the period

spanning from 2017 to 2020 about the characteristics of the company chairmanships. The
purpose of this study will be to evaluate the corporate governance practices of the top 100 listed

companies. In addition, it will evaluate the relationship between corporate governance and firm

performance. To answer the research questions, the study is divided into five (5) sections.

Introduction and theoretical framework are discussed in section one (1), the literature review is

provided in section two (2), data collection and variables are discussed in section three (3), and

empirical findings and conclusions are discussed in section four (4).

Research questions / research objectives

The goal of this article is to review some of the research that has been conducted across the globe

on the relationship between chairman independence and firm performance. The purpose of this is

to determine whether independent directors are positively associated with firm performance. This

study aims to examine the corporate governance practices of the top 100 publicly traded

companies and to study the relationship between corporate governance and firm performance.

The Malaysian Code of Corporate Governance guidelines for independent directors is not

sufficient to monitor management, according to Johari, Saleh, Jaffar, and Hassan (2008).

According to the researchers, the composition of the independent directors on the board was not

related to earning management. According to their findings, Malaysian firms usually have 1/3 or

33% independent directors on their boards, but this doesn't affect earnings management. In

addition, Wooi and Ming (2009) noted that independent directors have failed in their monitoring

role in Government Linked Companies (GLCs) in Malaysia.

Scope of investigation

For corporate financial reporting, the Malaysian Code of Corporate Governance (MCCG) is the

primary governing authority. The International Standard on Auditing (ISA) was followed by the
Bursa Malaysia Listing Requirement. This is by the Companies Act of 1965. (Act 125). In 2013,

the corporate governance regulatory framework for Malaysian publicly listed companies (PLCs)

underwent changes and enhancements because of the Bursa Malaysia Listing Requirements

assessment following the criteria of the 2011 Blueprint of and the Malaysian Code on Corporate

Governance 2012. This study analyses these topics to study corporate governance procedures

across Malaysia's top 100 PLCs and determine the link between corporate governance practices

and business performance. According to the news, MCGG has been in practice since 2000, and

the most recent update in 2017 reveals that only 70% of companies have accepted the practice of

MCGG, but it appears that there are still companies that are not completely employing and

applying CCG in their firm. Board independence guaranteed that the corporations practiced

effective corporate governance. Using a sample of 481, Foo and Zain (2010) examined board

independence, board diligence, and liquidity in Malaysian public-listed companies at the end of

2007. Their findings suggested that board independence is closely associated with information

sharing. According to the study, an independent board is more open and disseminates

information, improving the firm's liquidity. A study conducted by Abdullah (2004) examined the

relationship between the percentage of independent directors on the Main Board of the KLSE

and the company's performance in 1996. Profit margin, return on assets, and profits per share are

all positively and statistically significantly related to it. Researchers found that an independent

board of directors may contribute to the success of a firm. The report proved that many

independent directors on the board of directors contributed to the company's financial success.

Significance of the study

As a result, the emphasis of this research is on the efficacy of corporate governance procedures

among the top 100 publicly traded businesses on Bursa Malaysia, as well as the link between
corporate governance practices and company performance. To examine the relationship between

corporate governance practices and business performance as measured by return on asset (ROA)

and return on equity (ROE), the firm selected an indicator for corporate governance (Chairman

Independence). In this study, descriptive and correlation analyses were employed to test the

hypotheses. This research can assist policymakers and regulators improve corporate governance

regulations in the future, as well as increase knowledge of the link between corporate governance

practices and business performance. Below is the rationale on why we are focusing on chairman

independence. First, corporate boards are one of the most important corporate governance

institutions since they supervise and advise management on how to defend shareholders' interests

(Fama & Jensen, 1983). Researchers and regulators acquire a new perspective on the impact of

board of directors' characteristics on corporate performance by combining factors such as

director’s ownership, gender, director size, director race, and director independence. This study

aims to provide empirical data on the business performance of Malaysian listed companies as a

function of their chairman.

Framework of Research

In Malaysia, the code has been updated twice in the last decade. The new CGC code from 2017

to 2021 is now available, to strengthen obligations between the board of directors and the audit

committee to govern their roles and responsibilities. This regulatory emerged as a bridge

relationship between these two agencies, ensuring that the quality of financial disclosure is at its

finest. The shareholders are the principals of a company, while the managers are the agents who

operate on behalf of and in the interests of the principals. A well-developed market for corporate

controls is believed to be non-existent in agency theory, resulting in market failures, market non-

existence, moral hazards, asymmetric knowledge, incomplete contracts, and adverse selection,
among other things. Agency Theory is the most widely accepted and prevalent theory that

defines the link between corporate governance and business performance from the standpoint of

several governance proxies (Daily, Dalton, & Cannella, 2003). Jensen and Meckling (1976) and

Jensen (1983) contributed significantly to the development of agency theory. Due to variances in

the business environment, industrial environment, and institutional features, Agency Theory does

not adequately describe the governance structure in all analytical scenarios. Based on the agency

theory, board independence serves to protect shareholders' interests against managerial

opportunism, while controlling senior management behaviors to guarantee that they act in the

best interests of shareholders (Fama & Jensen, 1983).

R
 Chapter 2: Literature Review

N Autho Research Research Theor Hypothesis Research Findings Contributi

o rs, Questions/ Gap y Used Method on and
Title Objectives (Sample, Future
Period, Research
Country,
Data
Source)
1 Zabri Therefore, Previous Agenc H1: There is This The results This study
et al. this survey studies y a research is showed that provides
(2016). focuses on have Theory relationship limited to board size had decision-
the shown between the Top a very weak makers or
Corpor corporate different board size 100 public negative regulators
ate governance results on and a firm’s listed correlation with useful
Gover practices of the ROA. companies with ROA, information
nance the top 100 relationship H2: There is in BMB, but it was not on how to
Practic listed between a covering important for improve
es and companies corporate relationship the period ROE. Other future
Firm on Bursa governance between from 2008 results show corporate
Perfor Malaysia practices board size to 2012. that there is governance
mance: and the and and a firm’s no correlation policies and
Eviden relationship performanc ROE. between board helps them
ce between e. Previous H3: There is independence better
from corporate studies a and company understand
Top governance have relationship performance. the
100 practices shown between relationship
Public and mixed board between
Listed corporate results independenc corporate
Compa performanc regarding e and a governance
nies in e. the firm’s ROA. practices
Malays relationship H4: There is and
ia. between a performanc
board relationship e.
independen between
ce and board
corporate independenc
performanc e and a
e firm’s ROE.
2 Khan This study This paper Agenc The Paraphrase The survey In this
et al. used a aims to fill y conceptual d Text found that the study, a
(2019). dynamic the gaps in Theory framework The size of the good model
panel model the existing (AT), of the study survey board of (dashboard
The to examine literature Stewar reported the included directors, the model) was
dynam the and dship relationship 303 listed duality of the applied to
ic relationship provides Theory between companies chief present
relatio between a empirical (ST), NED and FP from executive theoretical
nship company's evidence and as hypothesis various officer, and and
betwee board for the Resour 1 (H1) of the non- the dual empirical
n structure relationship ce study. financial directorship evidence
corpor and the between Depen The second sectors, of have a and to better
ate company's CG and FP. dence hypothesis of which significant explain the
board financial Theory the study only 226 impact on a relationship
structu performanc Previous (RDT). (H2) stated listed company's between the
 re and e. literature the direct companies performance. structure of
firm used OLS relationship were The results the board of
perfor and FE to between BS selected show that directors of
mance: investigate and FP, during the most of the listed
Eviden the while the 2010-2015 administrative companies
ce relationship third period. variables are and
from between hypothesis intrinsic. corporate
Malays CG and FP. (H3) of the performanc
ia study e.
suggested
the direct
relationship
between
CEOD and
FP in this
paper.
3 Hussai The purpose There are Agenc H1: Board Quantitati As a result, it The study
n, M. of this study several y composition ve was found that has no
A., and is to define loopholes Theory is positively research the size of the theoretical
Hadi, the and (AT), related to methods board of contribution
A. corporate omissions Stewar firm's are used to directors, the s to the
(2017). governance in the dship performance. collect composition literature.
framework Companies Theory H2: Board data from of the board
Corpor (board Act, and (ST) size is 124 small of directors,
ate structure, amendment positively and and the
Gover board size, s to related to medium- composition
nance compensati Malaysia's firm's sized of the risk
and on Corporate performance. enterprises management
Firm’s committee, Governanc H3: The (SMEs) in committee
Perfor risk e remuneration Malaysia's have a great
mance: managemen Regulation committee is large influence on
Eviden t committee, s and Bursa negatively governme the profits of
ce gender Malaysia related to the nt sector the company.
from diversity) listing firm's (Construct
CIDB and requiremen performance. ion
Malays performanc ts will help H4: The risk Developm
ia e in terms strengthen management ent
of return on board committee is Commissi
investment independen positively on-CIDB).
(ROA). to ce and related to the
see if there support firm's
is a continual performance
significant reform
correlation (Malaysia).
with 2012
Companies Corporate
belonging Governanc
to major e Report on
government Complianc
industries in e with
Malaysia Standards
(Constructio and
n Industry Codes).
Developme Therefore,
nt Council this study
 CIDB). aims to
bridge this
knowledge
gap and
evaluate
the impact
of
corporate
governance
on the
performanc
e of the
Malaysian
constructio
n industry.
4 Yee, L. The main This Agenc H1: This study The results The
L., and purpose of document y Executive is show that the characteristi
Yet, C. this study is was Theory Compensatio collected size of the cs of
E. ( to adopted n positively from 2008 board and the corporate
investigate between related to and 2011 compensation governance,
Corpor the impact 2008 and firms’ annual of the board especially
ate of corporate 2011 and is internationali reports of are related to the size of
Gover governance a positive zation 46 chosen the the board of
nance on contributio H2: There is publicly internationaliz directors
and internationa n. The a positive companies ation of the and director
Interna lization MCCG relationship listed on company. remuneratio
tionali activities Code of between Bursa n, affect the
zation abroad. Conduct board size Malaysia. The internationa
of and Code and characteristics lization of a
Malays of Conduct internationali of corporate company.
ia are too old zation governance,
Public to be H3: There is especially the
Listed compared a positive size of the
Compa or inferred. relationship board of
nies between directors and
independent the
directors and compensation
internationali of directors,
zation influence the
H4: There is internationaliz
a negative ation of a
relationship company.
between
CEO duality
and
Internationali
zation
5 Abduls This article Many Agenc H1: the first Data were Based on the Therefore,
amad aims to previous y main collected findings of the results
et al. investigate studies in Theory hypothesis is from this study, we of this
(2018). the effect of Malaysia to examine secondary observed that investigatio
board have whether, or sources existing n add to the
The characteristi examined not, board based on a listing ongoing
Influen cs on a the characteristic purposivel requirements discussion
ce of company's relationship s influence y selected consistent of the
 The bottom line. between return on sample of with the impact
Board The four board assets among 341 agency theory between the
Of board performanc Malaysian Malaysian assumptions, characteristi
Direct characteristi e and listed Public the Malaysia cs of the
ors’ cs of company companies. Listed Corporate board and
Charac interest in performanc H2: the Companie Governance the
teristic this article e in only a second main s Code performanc
s On are CEO small hypothesis is throughout (MCCG), and e of the
Firm duality, sample to examine the period the company.
Perfor outside over a short whether, or ranging requirements Malaysian
mance: directors period. not, board from 2003 of Bursa companies
Eviden (ID), board characteristic to 2013. Malaysia may need to
ce size (BS), s influence not be as consider the
From and board earnings per effective as importance
Malays (BM). share among expected. of board
ian Return on Malaysian Improve the assets to
Public assets listed efficiency of improve
Listed (ROA) and companies. your future their
Compa earnings per enterprise. performanc
nies share (EPS) e.
are used as
indicators
of company
performanc
e.
6 Hussai The purpose Small Agenc H1: Board Data was Empirical The
n, M. of this study sample size y composition collected results show contribution
A., and is to Theory is positively from 380 that board size of this study
Hadi, consider the related to a small and does not is
A. R. following firm’s medium significantly significant
A. questions: performance. enterprises affect in that it is
(2018). (1) Does the H2: Board under the secondary the first
corporate size is Constructi data. This is study using
Corpor governance positively on consistent quantitative
ate mechanism related to a Industry with research
Gover affect the firm’s Developm Julizaerma design
nance, performanc performance. ent Board and targeting
Small e of the H3: The (CIDB) Zulkermain CIDB
Mediu Malaysian remuneration Malaysia. (2012). The registered
m Constructio committee is results suggest companies
Enterp n Industry negatively that the panel in Klang
rises Developme related to configuration Valley.
(SMEs nt firm’s does not have
) and Commissio performance. a significant
Firm’s n (CIDB)? H4: The risk impact in the
Perfor (2) Can the management case of
mance: independent committee is secondary
Eviden variables be positively data, which is
ce considered related to the consistent
from determining firm’s with (Core
Constr the performance. and Larcker,
uction performanc H5: Gender 2002). The
Busine e of the diversity is results also
ss, Malaysian positively show that the
Constr Constructio related to a Compensation
 uction n Industry firm’s Committee
Industr Developme performance. has no
y nt H6: Duality significant
Develo Commissio is negatively impact, which
pment n (CIDB) related to a is consistent
Board SME firm’s with Basiru
(CIDB (SME)? performance. (2015), where
) H7: the Risk
Malays Ownership Management
ia concentratio Committee
n is (RMC) has a
negatively slight impact
related to a on the
firm’s company's
performance. financial
H8: Audit performance
committee is (ROA).
positively Explains that
related to the it has only a
firm’s positive
performance. effect. From
the results, it
is clear that
gender
diversity does
not have a
significant
impact. This
is consistent
with Wang
and Clift
(2009), who
found that
there was no
significant
correlation
between
gender
diversity
(female senior
management)
and company
performance.
7 Shuker The purpose Existing Agenc H1: There is 300 The results Following
i et al. of this study studies y a positive Malaysian show that the
(2012). is to answer have Theory relationship public board size and recommend
the looked at between firm listed ethnic ations of the
Does question, corporate performance companies diversity are MCCG, the
Board "Do board performanc and are being positively company
of characteristi e factors, managerial randomly correlated manages the
Direct cs affect the but studies ownership. selected with ROE characteristi
or's performanc on the H2: There is from each while board cs of the
Charac e of a effects of a positive sector. independence board of
teristic company?" board relationship is negatively directors,
s characterist between firm correlated. In which will
 Affect ics are still performance terms of be a better
Firm limited. and board corporate guide for
Perfor size. performance, maintaining
mance H3: There is there is no the
? a positive significant company's
Eviden relationship relationship effectivenes
ce between firm between s.
from performance executive
Malays and board ownership, For future
ian independenc CEO duality, studies, we
Public e. and gender recommend
Listed H4: There is diversity. that you
Compa a negative consider a
nies relationship year or
between firm longer
performance longitudinal
and CEO study for
duality. more
H5: There is general
a positive results. We
relationship also
between firm recommend
performance that you
and gender include
diversity. other
H6: There is corporate
a positive governance
relationship mechanisms
between firm , such as
performance ownership
and ethnic structure, to
diversity. study the
overall
impact of
corporate
governance
on
operating
results.
8 Bhatt, The purpose The small Resour Our Our These results Our
P. R., of this paper sample size ce proposed sample for show that findings are
and is to with the Depen hypothesis is constructi corporate important to
Bhatt, investigate discussion dency that there is a ng the governance is managers
R. R. the period is Theory positive and Malaysian important for and
(2017) relationship from 2008 , significant Corporate Malaysian politicians.
between to 2013, Agenc relationship Governanc listed
Corpor corporate and it is y between e Index companies.
ate governance difficult to Theory corporate (MCGI) The results are
Gover and interpret governance consists of consistent
nance corporate the results and firm 113 listed with agency
and performanc from clear performance companies and resource
Firm e in listed evidence. in Malaysian in Bursa dependency
Perfor Malaysian firms. Malaysia theories.
mance companies. for the
in years 2008 Our results
 Malays and 2013. suggest that
ia corporate
governance
rules and
practices
actually
improve
corporate
performance,
and therefore
the MCCG
Code is
important for
Malaysia's
corporate
performance
and
sustainability.
9 Yat et The purpose The date Resour H11A: non- Data was There is no Further
al. of this study was small ce CEO Duality collected evidence of studies are
(2017). was to find as only the depend is positively from any needed
out whether 2012 to ency, related to Bursa significant using larger
The certain 2015 Stewar TSR post- Malaysia relationship samples and
Impact characteristi annual dship MCCG from 2012 between longer time
of cs of report for Theory 2012. to 2015. corporate series to
Board corporate vast or H11B: non- The total governance introduce
Charac governance performanc Agenc CEO Duality sample characteristics additional
teristic affect the e testing. y is positively size was and company characteristi
s on performanc Theory related to 180 firms. performance cs of
Firm e of SOEs ROA post- measures. corporate
Perfor in Malaysia. MCCG governance.
mance: 2012.
A The purpose H12A:
Post- of this study Independent
MCCG is to Chairman is
2012 determine positively
investi whether the related to
gation characteristi TSR post-
cs of MCCG
corporate 2012.
governance H12B:
contributed Independent
to the Chairman is
improveme positively
nt of related to
corporate ROA post-
performanc MCCG
e and 2012.
whether H13A:
there was a Having a
positive or majority of
negative Independent
relationship. Directors
positively
relates to
 TSR post-
MCCG
2012.
H13B:
Having a
majority of
Independent
Directors
positively
relates to
ROA post-
MCCG
2012.
H14A:
Having more
Women on
Board
positively
relates to
TSR.
H14B:
Having more
Women on
Board
positively
relates to
ROA.
1 Jamalu This study In Agenc H1. there is a The The results The survey
0 din, examines Malaysia, a y significant sample derived also
Mohd the impact relatively Theory relationship consists of suggest that provides a
Faizal of the limited between 3486 the board is reasonable
and internal study board size board of negatively and basis for the
Abdul governance investigate and Board directors significantly Malaysian
Rahma structure of d the size with for public related to the Stock
n, Malaysian relationship firm listed company's Exchange's
Ahmad SOEs on between performance. companies performance, restrictions
Fikri corporate the quality H2. there is a from 2012 but other on the
and performanc of family significant to 2015. internal number of
Abdul e. business relationship corporate directors of
Hamid, and the between the governance Malaysian
Noor quality of proportion of mechanisms listed
Hanisa financial independent were companies.
and reporting director firm considered
Hashi (Haniffa & performance insignificant
m, Cooke, proxies, both in this study.
Fathya 2002). ROA and
h and Because ROE.
Nik the family H3. there is
Abdul business a significant
Majid, was relationship
Wan dominant between the
Zurina. in terms of participation
(2018) resources of women
and directors
Corpor information towards firm
ate , they performance.
Gover tended to
nance leak
and relevant
Firm information
Perfor for
mance economic
in purposes.
Malays Purpose of
ia the report
(Wan
Hussin,
2009).
Voluntary
Financial
Informatio
n
Disclosure
Shows how
critical
resources
are being
used to
improve
the quality
of financial
reporting.
In addition,
the family
business
can also
provide
specific
information
. Create a
competitive
advantage
for a
company
that can
have a
positive
impact on
the
company's
performanc
e (Wang,
2006; Wu,
2010). In
particular,
Wang
(2006) and
Ali, Chen,
and
Radhakrish
nan (2007)
 found that
companies
with a high
proportion
of families
are
important
information
and
resources
for
business
success.

Malaysia has introduced and have amended to promote corporate governance; their compliance
and effect being followed by all the cooperate firm performance is still not clear. In Malaysia, an
early study conducted by Haniffa and Hudaib (2006), board size and CEO duality showed a
significant and positive relationship with ROA among 347 Malaysian non-financial listed
companies,

In Malaysia, the Malaysian Code of Corporate Governance (MCCG) is the primary governing
body for corporate financial reporting. Together with the International Standard on Auditing
(ISA) followed up Bursa Malaysia Listing Requirement. This is following The Companies Act
1965 (Act 125).

In terms of corporate governance regulatory framework for Malaysian publicly listed companies
(PLCs) did went through changes and enhancement in 2013 with the assessment from the Bursa
Malaysia Listing Requirements by the criteria of 2011 Blueprint of and Malaysian Code on
Corporate Governance 2012

In Malaysia, the code had been revised twice for a decade now. The revised code on CGC from
2017 to 2021 now is released aimed to fortify responsibilities between the barads of directors and
audit committee to control their roles and responsibilities. This regulatory evolved in bridge
relation with these two bodies so the quality of financial disclosure at its best practice
The focus of this study is the outcome of corporate governance and ownership structure on

corporate performance related to firms in Malaysia. Many aspects need to be related based on

the past studies, whereby factors such as independent directors, the role of duality, directors’

ownership shall be measured to draw the line on their best impact in the name of cooperate

governance.

For this there shall be co study of 2021 Malaysia CGC shall be used as a based linea to measure

with reporting firm. By studying a large number of prior studies which were mostly done in

Malaysia, their result on the influence of chairman independence on firms is mostly inconsistent.

This argument based on the prior result is mostly sone shows in the positive side and, at times

negative impact on the influence. Detail studies are required as CGC had also changed a few

times. And taking into account of new 2021 CGC practice, this new research becomes a

necessity for deep research and finding.

Previous studies also show inconsistency from the outcome, example Sabri et. alm (2016)

indicate a negative significance or weak in terms of relationship with ROA compared to ROE.

But at the same time, the result also shows no relationship between the board and independent

and firm performance. This policy and regulations play a vital role for such outcomes are still

and puzzle to be solved.

To add on issued with related papers, Nazri A.N, G (2020) recent years research paper also

larger board size allows the better exchange of ideas to come up with strategies, policies which

contribute better overall firm performance. |But they had failed to address what about small

companies and how they struggle and issues faced for not performing well. What is the code and

standard with new CGC complaint would affect the future performance of both small and big

firms need to be addressed for better understanding?

Some studies found a significant effect of board size, CEO duality, and non -executive directors

on firm performance Khan et.al (2019). Nevertheless, the paper also indicated the findings show

most governance variables are endogenous by nature. This is unclear doubt about how by nature

the performance would indicate board performance. Perhaps there is a gap in the code of practice

of CGC before 2021 introduce. This unclear perspective shall be taken into serious consideration

for future research focusing on how that can be addressed and identified. Looking into several

scandals involved in Malaysia from 1997 up to the present day, such as One MDB issue shows

the failure of adaptation of cooperate governance practice in the listed company. Some firms

have taken lightly on these implementations to avoid financial failure and scams involved within

the firm Khan et al (2019).

To study in detail these above issues would be via Agency theory (AT). This is a well-proven

track that mainly focuses on the perspective of different T.K Khan (2019). The fact of AT is

strongly recommended its clearly define the relationship and conflict between the firm and

owners of a company and concluded that problems happened due to separate breakups of

ownerships as well as managerial dominance between these parties. Clear evidence from the

report as AT suggested the minimal cost of adopting cooperate governance mechanism infirm

will added great value which eventually improves in firm’s performance. Agency theory

suggests that based on effective corporate governance practice on the board of directors is a vital

fundamental of good practice which companies should adhere. The effectiveness of CGC is still

not in full scale, with still gaps where literature for new research concerning the benefit of CGC

code compliance shall be undertaken Thus, this study wishes to deeply investigate
Therefore, the hypotheses of this paper were developed based on this point below and research

had focused and brought forward the quality and complexness in predicting financial distress and

concluded the role of the CGC mechanism to prevent business failure.

Hypothesis 1: There is a relationship between Chairman independence and a firm’s ROA.

Hypothesis 2: There is a relationship between Chairman independence and a firm’s ROE

Chapter 3 - Methodology

Research Design

This study was carried out utilizing quantitative approaches. In this study, extensive statistical

analysis, tables, and graphs will be used. The evaluation and appraisal of company performance

are based on data from each firm's annual report. Data analysis will be used in the research

technique to determine the association between Corporate Governance Practice (CG) and Firm

Performance (FP). The research approach in this study will comprise samples and sources of

research data, as well as variable measurement.

Sampling and Data Collection

This research collected data samples from Malaysia's top 100 publicly listed companies. All of

these companies are listed on Bursa Malaysia, a stock exchange holding corporation that offers a

variety of derivatives and securities trading services. This study continuously chooses 100

companies that are suitable to be used as samples and have represented the whole population of

Bursa Malaysia from 2017 to 2020, which is the last sample accessible from the data.

The evidence is gathered from secondary sources such as the company's annual report and

website. The annual reports issued by the corporations themselves have proven to be a highly

significant source of information, particularly in terms of the corporate governance standards

employed by these firms. Administrative data acquired from both the annual report and the

company's official website, according to Khan et al. (2019), can provide more accurate and

accountable information than interviews, particularly in areas such as corporate governance

practices and board chair characteristics.

Data Analysis

This research will use the Statistical Package for Social Sciences (SPSS) to analyze and appraise

data to investigate the association between corporate governance practice and company

performance. This research will employ two types of analysis: descriptive analysis and

correlation analysis. Of course, the original properties of the data set obtained for this study will

be visible based on the analysis performed utilizing the two approaches. Furthermore, this

strategy is essential for summarizing data and demonstrating the relationship between two

different variables.

Variables of the Study

This study undertakes an empirical analysis of Corporate Governance Practice and firm

performance to pick the most appropriate variables for the independent and dependent variables

that can more clearly define the relationship between these variables. This section will outline

the variables that will be used in this investigation. The connection test includes two dependent

variables: Return On Assets (ROA) and Return On Equity (ROE), which correspond to the

performance of all firms listed on Bursa Malaysia. While the independent variable used in this

study is Corporate Governance Practice where the indicator used is board independence.

Independent Variables

Research on Corporate Governance has employed a variety of proxies to evaluate the

relationship between Corporate Governance and firm success. Some of them employ various

structures, such as the audit structure, ownership structure, or even the capital structure of the

organization. This study examines the impact of corporate governance on the performance of

companies listed on the Bursa Malaysia Securities Berhad by utilizing the board structure,
particularly the chairman of the company. In this study, one independent variable, namely Board

Independence, is used as a proxy for Corporate Governance.

Dependent Variables

The performance of companies listed on the Bursa Malaysia is represented by two dependent

variables in this study: Return on Assets (ROA) and Return on Equity (ROE). According to

Tesamenia et al. (2008), financial criteria can analyze how a firm meets its financial goals and

demonstrate the shareholders' attitude toward the organization. There are several points of view

on the usage of various variables to evaluate firm performance. For example, Andreou et al.

(2014) determined the return on assets as operating profit before depreciation divided by total

assets using annual data. These criteria, however, have been employed in comparable studies to

investigate the relationship between corporate governance and firm performance (Giroud and

Mueller, 2011).

The second dependent variable used to define the company's performance is ROE, which

represents the shareholders' return on equity (Salim and Yadav, 2012). This statistic might help

to determine how successfully a company can utilize its shareholders' existing equity to create

operating income. If ROE has a greater value and represents higher returns to the company, it is

a favorable indicator of a company's performance. If, on the other hand, the ROE is shrinking

and dropping, this indicates that the company's performance is deteriorating. Before making an

investment decision, most investors, brokers, and even researchers can draw judgments based on

the company's performance from current financial ratios. This is often referred to as the

complementary approach to investment and the return on net worth.