Corporate Governance Literature Review

LITERATURE REVIEW

Review of Literature

There is a large body of literature that talks on the corporate governance. There are also many pieces of research that have been conducted in other countries, which assess the relationship between corporate governance and organizational performance. There are other researches, which also assess the quality of corporate governance, rather than its mere existence with the way finance functions in an organization. Again, the outcome of those literature is not consistent as some would say the corporate governance have a significant influence on the firms performance but on the other hand, some would say there are no relationship between the corporate governance on the performance of the firms.

1. Corporate

The Malaysian Code on Corporate Governance (Code), first introduced in 2000, is identified to be a major milestone in the history of corporate governance reforms in Malaysia. A lot of rules been developed and improvised. The Code was later amended in 2007 in order to redefine the ‘roles and responsibilities of the board of directors, audit committee, and the internal audit function’ (MCCG, 2012). The Malaysian Code on Corporate Governance 2012 (MCCG 2012) promotes the role of directors as active and responsible fiduciaries with intent to strengthen the board structure and composition. According to the MCCG (2012), the directors are considered as the guardians of the company and are expected not only to set the strategic direction and oversee the conduct of the business but also to ensure that the company operates strictly in compliance with the laws and ethical values (MCCG,

In response to the crisis, the Securities Commission Malaysia took a series of initiatives including the introduction of Malaysian Code on Corporate Governance in 2000 so as to improve the country’s corporate governance framework. Since then, the Securities Commission Malaysia has been on a continuous journey to improve the corporate governance policies and procedures of the country. Securities Commission Malaysia is a regulator for the Malaysia’s capital market which is the Bursa Malaysia. Securities Commission Malaysia is in charge of constantly monitoring and supervising the companies and regulates them (Securities Commission Malaysia, 2015). Today, Malaysian corporations are well informed of the significance of good governance and hence they are committed to developing and sustaining a strong culture of corporate governance. According to the MCCG (2012), corporate governance is defined as “the process and structure used to direct and manage the business and affairs of the company toward enhancing business prosperity and corporate accountability with the ultimate objective of realising long-term shareholder value, whilst taking into account the interest of other stakeholders”