Hairul Azlan Annuar

Are there barriers to independent non‐executive directors' effectiveness in performing their roles?

Purpose – The overall purpose of the research presented is to ascertain whether independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs) may be facing certain barriers in the performance of their roles. The findings may provide helpful insights to Arab businessmen who wish to do business in Malaysia, notably with PLCs, as they may depend upon local INEDs to protect their investments and to act on their behalf. The absence of barriers to the performance of INEDs’ role may provide these businessmen with the confidence and added assurance to invest safely and profitably in Malaysia. Design/methodology/approach – A qualitative approach, consisting of a series of interviews with board members, was chosen. The sampling frame was made as large as possible and for the purpose of this study, consisted of board members who sit on publicly listed companies (PLCs) of the main board and Malaysian-owned. Findings – The interviews revealed that a majority of the interviewees perceived that the barriers were either non-existent or at the least manageable. There were indications however that INEDs in small firms might face some of the problems suggested. The culture effect may also mediate their effectiveness in performing their roles. When there are barriers present, the most difficult problem faced by the INEDs concern time available to spend with the company. Research limitations – This research utilised interviews. Generalisations may be an issue when interviews are used as the method of inquiry. Also, the sample is not random as access to many directors depended on recommendations. In addition, respondents were consciously selected in order to obtain various board positions that include independent and non-independent directors. Originality/value – There is a lack of work on studying barriers to INEDs effectiveness in developing countries, whereby previous work and literature review were predominantly based upon the experience of Western economies.

The effect of award on CSR disclosures in annual reports of Malaysian PLCs

Purpose - – The paper aims to examine the determinants of corporate social responsibility (CSR) disclosures in the annual reports of Malaysian public listed companies (PLCs). In 2006, Bursa Malaysia Berhad (BMB) launched its CSR Framework (effective in 2007) which is supposed to guide the Malaysian PLCs’ CSR disclosures. It is believed that this CSR framework may influence CSR disclosures to be more systematic, yet there is no evidence whether this framework influences the extent and quality of CSR disclosures. Thus, this study examines this area of research. The study also tests the influence of award on CSR disclosures. Design/methodology/approach - – CSR disclosure checklist was developed to analyse the extent and quality of CSR information disclosures in the year 2008 annual reports of the Malaysian PLCs. Findings - – Malaysian PLCs disclose more CSR information related to community and environment than workplace and marketplace CSR themes. On the other hand, the quality of disclosure practices was minimal when it is compared to the extent of disclosure practices. Finally, the study also found that the award’s variable has a significant positive relationship with both the extent and quality of CSR disclosure practices of the Malaysian PLCs. Research limitations/implications - – The recently developed BMB’s CSR framework seems to have impact on the level and systematic CSR reporting practices of Malaysian PLCs. However, the quality of CSR disclosures is considered minimal. Practical implications - – The results of the study bring some practical implications to the regulators, particularly Bursa Malaysia. First, it is good to observe that most companies have practiced specific disclosure in a separate statement with regard to CSR. However, the format of presentation and the extent of disclosure vary among the firms. Second, further guidelines need to be developed to provide a clearer framework of disclosure for CSR information. At the moment, Bursa Malaysia only listed down general principles of CSR themes. In addition, the regulators should also look into the evolving issues in CSR, such as the issue of climate change reporting. For example, the Climate Disclosure Standards Board has issued a voluntary Climate Change Reporting Framework. Originality/value - – This study examined both the traditional (i.e. firm size and profitability) and non-traditional (i.e. award) factors influencing management’s decision to disclose CSR information in the annual reports of the Malaysian PLCs. Furthermore, the study reported how Malaysian PLCs comply with the recently implemented CSR framework issued by BMB.

An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies

Purpose - – The purpose of this study is to ascertain the control role of independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs), as prescribed in the Malaysian Code on Corporate Governance (MCCG).The MCCG (2000) requires substantive involvement of INEDs on the audit, nomination and remuneration board sub-committees. The study also examines the effectiveness of INEDs in discharging their monitoring roles in these sub-committees. Design/methodology/approach - – A qualitative research design consisting of a series of interviews with board members of Malaysian-owned PLCs on the board of Bursa Malaysia was used. Findings - – Interviews with 27 company directors reveal that, due to their independence, INEDs are crucial in safeguarding the interests of smaller investors if situations arise in which shareholders’ interests may be threatened. The interviews also disclose that the audit committee possesses the most authority among the sub-committees, as it derives its power not only from the Listing Requirements but also from statute, as well as being involved in areas of the company not traditionally associated with the committee. The study also reveals the differences in opinion between executive directors and INEDs with regard to the extent of INEDs’ effectiveness. Research limitations/implications - – This research utilises interviews. Generalisation may be an issue when interviews are used as the method of inquiry. In addition, the sample is not random, as access to many directors is dependent on recommendations. In addition, the respondents have been consciously selected to cover various board positions, including independent and non-independent directors. Practical implications - – The findings from this research suggest that INEDs are able to discharge their responsibilities in overseeing the conduct of executives and protecting the interests of investors. In addition, the interviews disclose that the effectiveness of INEDs depends on how non-executive directors view INEDs being on the board. Rather than focusing solely on their control role, INEDS are expected to have a more proactive and progressive role in ensuring sustainable growth and the expansion of the business entity. Originality/value - – There are limited studies using qualitative research design in investigating the effectiveness of INEDs in the control role of the board in developing countries. Prior studies were predominantly based upon the experience of Western economies.

Intellectual capital disclosure and corporate market value: does board diversity matter?

Purpose The purpose of this paper is to examine the relationship between IC disclosure and the corporate market value (CMV) of listed firms on the main board of Nigeria Stock Exchange and to test the moderating effect of religious and ethnic composition of board members on the relationship. Design/methodology/approach This study applies the signaling and upper echelons theories in formulating four hypotheses that guide the results analysis. By employing a two-step dynamic system generalized method of moments and controlling for the possible endogeneity effect on the parameters estimated for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of IC disclosure with CMV, namely, cost of capital and market capitalization, and the moderating role of religious and ethnic composition on such association using data over the 2010 to 2014 financial years. Findings The results show a significant positive relationship between overall IC disclosure and market capitalization and a negative impact on cost of capital, which are in line with the hypothesized propositions. The moderating effect of board diversity is also confirmed. This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders and the established moderating role of board diversity in IC disclosure-related studies. Practical implications The regulators may consider development of standards on board composition about religious and ethnic composition in order to curb the domination from same group in the board room. Those charged with governance should be concerned with the disclosure of IC information in the financial statements as it has value relevance to the investors, in line with signaling theory. Social implications The ethnic and religious composition of board members is a significant factor within the board room and needs to be given adequate consideration. Originality/value This study is the first to consider IC disclosure across whole sectors in the Nigerian economy and looks upon ethnicity and religious affiliation of boards as moderating variables. The study controls for heteroscedasticity and endogeneity issues by adopting two-step dynamic system generalized method of moments.

Intellectual capital efficiency and corporate book value: evidence from Nigerian economy

The purpose of this paper is to examine the value relevance of intellectual capital (IC) by analysing the relationship between IC efficiency (ICE) and corporate book value of listed firms on main board of Nigeria Stock Exchange.,This study applies the resource-based theory in formulating two hypotheses that guide the results analysis. By employing a two-step dynamic system generalised method of moments (GMMs), and controlling for the possible endogeneity effect on the parameters estimated, for a sample of 91 listed firms on main board of Nigeria Stock Exchange, this study investigates the association of ICE and corporate book value, namely, cash flow from operation and economic value added (EVA), using data over the 2010 to 2014 financial years.,The results show a significant positive relationship between overall ICE and corporate book value (cash flow from operation and EVA). This study contributes to recent evidence concerning the value relevance of IC information to investors and other interested stakeholders.,The generalisation of the results to smaller firms, in the alternative securities market, may be inappropriate as study sampled listed firms on the main board of Nigerian Stock Exchange.,Those charged with governance should be concerned with the investment and management of IC as it enhances the economic value and operating cash flow in line with the resource-based theory.,This study is first to consider the ICE study across all sectors in the Nigerian economy using modified Pulic value added intellectual capital. The study controls for heteroscedasticity and endogeneity issues by adoption of two-step dynamic system GMMs.

Changes in ownership forms and role of institutional investors in governing public companies in Malaysia: A research note

Purpose – The purpose of this paper is to ascertain whether different types of institutional investor in Malaysia are involved in the corporate governance of their investee companies, and, if yes, to what extent is the level of the involvement. Design/methodology/approach – A qualitative approach, consisting of a series of interviews with 18 senior investment managers of different types of institutional investor, was chosen. Findings – The findings suggest that lessons learnt from the fallout of the Asian crisis has made Malaysian institutional investors not only to be more prudent in managing their total funds and in making equities investment decisions, but has resulted in a more active participation in their “core” investee companies apart from merely discharging their voting rights. Interview analysis revealed that government-linked investment companies are championing the cause and could possibly affect the overall level of institutional investors’ involvement, which bode well for the future of the c...

Independent non-executive directors strategic role – some evidence from Malaysia

Purpose – The overall purpose of the research presented is to ascertain whether independent non-executive directors (INEDs) in Malaysian publicly listed companies (PLCs) are involved in corporate strategy. Design/methodology/approach – A qualitative approach, consisting of a series of interviews with board members, was chosen. The sampling frame was made as large as possible and, for the purpose of this study, consisted of board members who sit on PLCs of the main board and Malaysian-owned. Findings – The findings reveal that INEDs in Malaysia may display the same types of involvement in the formulation phase as their counterparts in UK, which McNulty and Pettigrew (1999) categorised as taking strategic decisions, shaping strategic decisions and shaping the context, conduct and content of strategy. The findings also show that the three phases of strategy are linked and that INEDs’ behaviour during evaluation may be moderated by the strategy’s success or failure and by their involvement in the earlier phas...