Effects of corporate governance and environmental disclosure on performance
Shareholders are the owners of business, however, the shareholders are usually not decision-makers on day-to-day operational decisions. Thus, the separation of ownership and control has resulted possible conflict of interest between the shareholders (principal) and board of directors (agent). Cor...
Saved in:
| Main Author: | |
|---|---|
| Format: | Thesis |
| Language: | English |
| Published: |
2017
|
| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/68492/1/FEP%202018%205%20-%20IR.pdf |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | Shareholders are the owners of business, however, the shareholders are usually not
decision-makers on day-to-day operational decisions. Thus, the separation of
ownership and control has resulted possible conflict of interest between the
shareholders (principal) and board of directors (agent). Corporate governance, hence,
acts as a monitoring mechanism to reduce the conflict of interest between them. On
the other hand, companies today, are not just being expected to provide shareholders
with good financial returns. The companies are expected to “give back” to the society,
by involving in sustainability activities. However, the real commitments from
companies to perform in sustainable manners are questionable. Over the years,
environmental disclosure quality remained low among Malaysian listed companies.
This study applies agency theory, stakeholder theory and legitimacy theory in
assessing the effects of corporate governance and environmental disclosure quality on
financial performance. Many past researches focus on the effects of corporate
governance on financial performance; effects of environmental disclosure quality on
financial performance; and effects of corporate governance on environmental
disclosure quality separately. This study also intend to extend the current models and
evaluate the mediating effect of environmental disclosure quality in between corporate
governance and financial performance.
This study is carried out in Malaysia among companies in environmentally sensitive
industry as the operations of environmentally sensitive industry is considered to be
more detrimental to the environment. Data are extracted from companies’ annual
reports over five years’ duration, namely year 2011 to 2015. The data collected is then
being analysed using panel data analysis. Results show non-duality of CEO significantly improve companies’ return on asset. Besides, the proportion of
independent directors and non-duality of CEO are significant in improving the
environmental disclosure quality of Malaysian listed companies. However, the
environmental disclosure quality does not have significant influence towards
companies’ financial performance. Lastly, environmental disclosure quality is an
insignificant mediator between corporate governance and financial performance.
This study provides empirical evidence to policymakers as to the importance of
authority’s interference in bringing corporate governance and environmental
disclosure quality to greater heights. Stricter regulatory requirements may be a
necessity by regulators in order to further strengthen the corporate governance and
environmental disclosure quality among Malaysian companies. |
|---|