Malaysia Development Berhad Case Study
CHAPTER 1
INTRODUCTION
1.0 Background of Study
Recently, there are numbers of companies who had faced financial problems leading their business toward insolvency. These problem should be detected well before a financial debt crisis occured. Previous empirical study by (Mikkelson and Ruback, 1985 and Holderness and Sheehan 1985) have confirmed that the company may be in financial trouble due to sudden inventory build-up or decline in the inventory turnover rate, rapid rise in debt-to-equity ratio or there is high employee turnover in the department. Pertaining to this outcome; owners should resist the temptation to take on additional debt until they have finalized the causes of their company’s financial challenges. Board of directors (BOD) should be able to deal with company financial problems which related to debt restructuring and refinancing. BOD should also helps in rearranging the company’s structure, and provide no-obligation consultation to review company’s challenges to ensure that the company come back on track.
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The company have been severely criticized by the public for a lack of transparency in its business dealings. Both sides chose not to continue with some joint-venture projects. Due to this particular case, Tun Mahathir Mohamed, Malaysian’s former prime minister, express his worried and want this case to solve as soon as possible in order to avoid foreign exchange losses. Currently, the government had formed a committee to tackle this issue legitimately. Hence, corporate governance and shareholder monitoring are two major components that need to be included in order to justified the
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