DO FIRM AND BOARD CHARACTERISTICS AFFECT FINANCIAL PERFORMANCE?

  • Radziah Mahmud Faculty of Accountancy, Universiti Teknologi MARA Selangor
  • Nor Khadijah Mohd Azhari Faculty of Business Management, Universiti Teknologi MARA Penang
  • Nur Mimi Najihah Ghazali Faculty of Accountancy, Universiti Teknologi MARA Selangor
Keywords: Firm characteristics, board characteristics, firm financial performance

Abstract

Due to the acceleration of corporate fraud, misdemeanours, negligence, and immense loss of shareholders’ investment, the concerns about the firm and board attributes have captivated people’s interest, mainly due to the corporate scandals affecting various worldwide corporations. Weak corporate governance policies ultimately result in the collapse of businesses. The issue highlights the need for a better understanding of the impact of corporate governance on corporate performance. Thus, this study aims to examine how firm characteristics (leverage, liquidity) and board characteristics (board size, board independence, gender diversity, Chief Executive Officer (CEO) duality) affect a firm’s financial performance in a sample of listed companies from Bursa Malaysia. The data were collected from 137 listed companies in the main market from 2017 to 2019. The results suggest that liquidity positively affects firm performance measured by Return on Asset (ROA), while leverage has a significantly negative effect on firm financial performance. Contradictory to the agency theory, the board size, board independence, gender diversity and CEO duality do not affect the firm financial performance. This study contributes to the current debate on the effect of firm and board characteristics on a firm’s financial performance. The findings may also provide insight to investors and regulators.

Author Biographies

Radziah Mahmud, Faculty of Accountancy, Universiti Teknologi MARA Selangor

Radziah Mahmud is a senior lecturer at Universiti Teknologi MARA Puncak Alam Malaysia. She earned her PhD from Universiti Teknologi MARA, Malaysia. She taught financial accounting and reporting courses in undergraduate and postgraduate programs. Her research interest areas are corporate reporting, corporate governance, capital structure and  debt management issues.

Nor Khadijah Mohd Azhari, Faculty of Business Management, Universiti Teknologi MARA Penang

Nor Khadijah Mohd Azhari is a senior lecturer at Universiti Teknologi MARA Pulau Pinang, Malaysia. She obtained her PhD from Eskisehir Osmangazi University, Turkey. She has taught courses in Financial Reporting, Financial Management, Taxation and Public Sector Accounting. Her research interest area is capital structure, corporate reporting and corporate governance.

Nur Mimi Najihah Ghazali, Faculty of Accountancy, Universiti Teknologi MARA Selangor

Nur Mimi Najihah Binti Ghazali completed Master’s Degree in Forensic Accounting and Financial Criminology from Universiti Teknologi MARA. Her area of interest is in corporate governance, financial performance, and taxation. She is currently served as Finance and Procurement Supervisor at Projek Agropolitan Pekan.

Published
2022-11-14
Issue
Vol 25 No 03 (2022): Gading Journal for Social Sciences Vol. 26 No. 03 - OCTOBER 2022
Section
Article/Paper

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