Hasnah Kamardin

Internal corporate governance and board performance in monitoring roles

Purpose - This paper aims to examine the relationship between internal corporate governance mechanisms and board performance in monitoring roles. Design/methodology/approach - A survey questionnaire was used to gather data on board performance, while annual reports were employed to gather data on internal corporate governance mechanisms. Data for board performance were based on 112 directors who represent the companies. Findings - Factor analysis extracted two dimensions of monitoring roles: management oversight roles and performance evaluation roles. Non-independent non-executive directors and managerial ownership were found to be positively related to both dimensions of monitoring roles, while the multiple directorships of non-executive directors were negatively related to management oversight roles. Practical implications - The paper establishes the need for regulators to pay particular attention to multiple directorships, which are commonly practiced in public listed companies. The contribution of non-independent non-executive directors rather than independent directors in monitoring roles calls for further research. Regulators need to emphasize the performance evaluation roles of the board of directors (BOD), as much emphasis has been given to management oversight roles. Originality/value - The study contributes to the literature concerning monitoring roles as it shows that management oversight roles and performance evaluation roles are differentiated. The findings provide an avenue for the contribution of non-independent non-executive directors and multiple directorships in monitoring roles.

Earnings quality and audit attributes in high concentrated ownership market

Purpose The purpose of this study is to examine the effect of the audit committee (AC) independence, financial expertise, internal audit function, audit quality and ownership concentration on earnings quality (EQ) and, consequently, ascertain whether the AC’s independence and financial expertise has a moderating effect on the relationship between internal audit function and EQ. Design/methodology/approach The study sample is 508 firms listed on the Main Market of Bursa Malaysia (formerly known as Kuala Lumpur Stock Exchange) for the years 2009 to 2012. EQ was measured using two modified Jones models of discretionary accruals. Findings The findings reveal that the independence of AC and investment in internal audit function, as well as the Big4 audit firm, are related to greater EQ. Ownership concentration is found to be associated with lower EQ. The study provides evidence that AC’s independence moderates the relationship between internal audit function (investment in and sourcing arrangements of internal audit function) and EQ. It also shows that AC’s financial expertise moderates the relationship between sourcing arrangements of internal audit function and EQ. Practical implications This study extends the prior related literature by examining the AC’s independence and financial expertise as moderating variables on the relationship between internal audit function and EQ. Social implications Policymakers might use the findings regarding EQ in relation to governance practices, to recognize the important roles played by the AC’s independence and financial expertise on the effectiveness of internal audit function with EQ. Originality/value This study uses the agency theory and resource dependence theory to provide empirical evidence on the impact of internal audit function and AC on EQ in the ownership concentration environment.

Proprietary costs of intellectual capital reporting: Malaysian evidence

Purpose - – The purpose of this paper is to examine the relationship between intellectual capital (IC) performance (value-added intellectual coefficient (VAIC)) and company characteristics with IC disclosure (ICD) in Malaysian listed companies. Design/methodology/approach - – Sample of the study is 68 biggest Malaysian companies listed in Malaysian Stock Exchange based on market capitalization in year 2006. The paper follows the classification of ICD by Huang Findings - – Results of the study show that VAIC is negatively related to ICD. Further classification of VAIC shows that intellectual capital efficiency and human capital efficiency are negatively related to ICD whilst structural capital efficiency is not related to ICD. Company size and leverage are found to be positively related to ICD. Research limitations/implications - – Negative association between VAIC and ICD suggests that companies reduce ICD for competitive advantage reason which supports the proprietary cost theory. The findings of the study may provide some evidence to regulators to enhance the reporting practices of IC for the benefits of users of financial reporting in making relevant decisions. The focus should be given on the reporting of human capital items. Originality/value - – This is the first paper to use IC framework by Huang

Managerial Ownership and Firm Performance: The Influence of Family Directors and Non-Family Directors

Abstract Purpose The main purpose of the study is to examine the influence of family directors on the firm performance of public listed companies (PLCs) in Malaysia. This study provides empirical evidence on the agency problems between controlling shareholders and minority interests in the concentrated ownership setting. Design/methodology/approach Samples of the study are 112 PLCs in year 2006. Two measures of firm performance are used: return on assets (ROA) and Tobin’s Q. Managerial ownership refers to the percentage shareholdings of executive directors with direct and indirect holdings. It was further categorized into family ownership and non-family ownership. Findings In relation to ROA, managerial ownership is found positively significant. The results also show that the positive relationship between managerial ownership is contributed by the managerial-non-family ownership. In relation to Tobin’s Q, the results show a U-shape with turning point at 31.38% for managerial ownership and 28.29% for the managerial-family ownership. The results found significant and positive relationships between managerial ownership and both measures of firm performance which indicates that managerial ownership and family ownership yield greater efficiency. Research implications The study highlights the effects of corporate governance on ROA and Tobin’s Q are somewhat different. It provides some evidence on the need to use appropriate measure of firm performance. The significant relationship supports the argument of Chami (1999), Fama and Jensen (1983), and DeAngelo and DeAngelo (1985) and empirical evidence of Lee (2004) that family ownership enhances monitoring activities. Originality/value Differentiating the types of managerial ownership into family and non-family categories enriches our knowledge about who actually contributes to the improved performance.

Intellectual Capital Disclosure: The Effect of Family and Non-Executive Directors on Board

The study examines the effect of corporate governance characteristics on the intellectual capital (IC) disclosure in public listed companies in Malaysia.Samples of the companies are 55 companies from the top 100 companies in 2006 based on market capitalization.Data are collected for 2 years (2006 and 2011).The t-test analysis shows that IC disclosure is found more in big size companies, high leverage companies, government-link companies (GLC), and high-tech companies. Results from the regression analysis show that family members on board are negatively related to IC disclosure.This finding is consistent with previous studies that family firms prefer less voluntary disclosure.Further analysis with each component of IC shows that foreign ownership is positively related to structural capital and non-executive directors are positively related to human capital disclosure. This result somehow supports the important role of non-executive directors and foreign ownership to reduce the information asymmetry between managers and shareholders.