Corporate governance, board ethical commitment and corporate performance of Malaysian listed companies

Date of Award


Degree Type


Degree Name

Doctor of Philosophy


School of Business and Law

First Advisor

Dr Zubaidah Ismail


The failures of high profile international companies such as Enron, Parmalat and Barings Bank and also companies in Malaysia such as Transmile, Idris Hydraulic, Aokam, PWE Industries and Hwa Tai Industries have triggered much interest to researchers and regulatory bodies on the work of company directors, arguably the front liners that are responsible for the success of the company. Although many reforms were taken in the last decade to prevent corporate collapses, how directors work and whether there are specified internal guidelines that guide their decision making, which affects the stakeholders of the company have been neglected. The collapse of many large companies gives significant evidence that without ethical leaders, corporate governance mechanisms and any type of control may malfunction. In 2012 the Securities Commission of Malaysia added a new principle, board ethical commitment, in the revised Malaysian Code of Corporate Governance (MCCG). These developments have motivated the current study to explore and investigate the contribution of board ethical commitment towards the sustainable performance of the company. While there has been research on the association between corporate governance and firm performance, most of the studies use single measures of each corporate governance principle and no known archival research has been conducted on board ethical commitment. This study looks at multiple measures of each corporate governance principle and their association with firm performance. It also aims to examine the extent of companies compliance and disclosure with respect to board ethical commitment, test whether board ethical commitment is associated with firm performance and whether it will enhance the association between corporate governance and firm performance. This study uses two methods of data collection. First, archival analysis of the annual reports and websites of Malaysian listed companies. The MCCG 2012 Index was created to assess the compliance of companies with the corporate governance requirements while a comprehensive checklist was developed from international best practices to assess the level of board ethical commitment. Second, semi-structured face-to-face interviews with directors of the listed companies were conducted to draw insights into the reasons and justifications of the results of the archival analysis. This study found that in general, corporate governance does not have a significant positive relationship with corporate performance. Further analysis found evidence that only two specific corporate governance practices namely sustainable policies and proactive shareholders engagement have a significant positive relationship with performance of the company. This study also found that there is a relationship between board ethical commitment and company performance. In addition, the board ethical commitment enhanced the relationship between corporate governance and corporate performance. This finding indicate the importance of business ethics generally and ethical leadership particularly in contributing good corporate performance.

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