The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies

Past studies revealed that capital structure and corporate governance are the main reasons for various financial crises. Since then, many studies have evaluated the consequences of both factors, particularly on the performance of corporations. However, the literature remains ambiguous about the impa...

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Main Author:	Khatib, Saleh F. A.
Format:	Thesis
Language:	English
Published:	2022
Subjects:	H Social Sciences (General)
Online Access:	http://eprints.utm.my/108274/1/SalehF.A.KhatibPAHIBS2022.pdf.pdf
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id	my-utm-ep.108274
record_format	uketd_dc
spelling	my-utm-ep.1082742024-11-01T02:28:28Z The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies 2022 Khatib, Saleh F. A. H Social Sciences (General) HD Industries. Land use. Labor Past studies revealed that capital structure and corporate governance are the main reasons for various financial crises. Since then, many studies have evaluated the consequences of both factors, particularly on the performance of corporations. However, the literature remains ambiguous about the impact of capital structure and corporate governance on corporate performance because most studies focus on a single measure of capital structure (total debt). The purpose of this study is to furnish incremental information about the interrelationship between corporate governance, capital structure, and firm performance using three measures of capital structure. Additionally, unlike most prior studies, this study has considered all categories of governance, namely board of director attributes, audit committee characteristics, and ownership. This study employs the agency and free cash flow theories in order to explain the inconsistency between reality and conventional beliefs about corporate capital policies. This provides a new perspective on the nature of the corporate capital structure and its association with corporate governance and firm performance. This study used balanced panel data, which included 528 non-financial Malaysian public listed companies from 2015 to 2019. Data were analysed using the Generalized Method of Moments estimations (GMM) to address the endogeneity issue. Generally, findings reveal a significant and positive influence on most corporate governance attributes on the performance of firms and their capital structures. The findings also revealed that board diversity is the most significant attribute that enhances the performance of firms. Malaysian companies achieve higher performance with smaller board sizes, more female directors, more board meetings, a larger audit committee size, higher audit committee independence, less director change (turnover), and fewer audit committee meetings. Additionally, the results of this study have confirmed the mediating role of the corporate capital structure in the relationship between corporate governance and firm performance. Consistent with the Pecking Order Theory, the results suggest that companies need to keep a lower level of debt in order to deal more efficiently with investment opportunities (using an internal source of capital) and also to improve their financial performance. Additionally, it is revealed that a lower debt level strengthens the corporate governance quality of companies so as to compensate for the agency costs rising due to excessive cash. Findings also show that capital structure and firm performance are negatively and significantly associated, which means that Malaysian companies with lower debt ratios have higher performance. This contributes to the body of knowledge by providing insights into the indirect role of various corporate governance attributes in enhancing the performance of companies in Malaysia. This study provides a solid practical implication for regulators and policymakers by indicating empirically that capital structure should be taken into account when structuring the monitoring mechanisms of firms to improve business performance. Finally, this study offers recommendations and directions for future research. 2022 Thesis http://eprints.utm.my/108274/ http://eprints.utm.my/108274/1/SalehF.A.KhatibPAHIBS2022.pdf.pdf application/pdf en public http://dms.library.utm.my:8080/vital/access/manager/Repository/vital:154383 phd doctoral Universiti Teknologi Malaysia Azman Hashim International Business School
institution	Universiti Teknologi Malaysia
collection	UTM Institutional Repository
language	English
topic	H Social Sciences (General) H Social Sciences (General)
spellingShingle	H Social Sciences (General) H Social Sciences (General) Khatib, Saleh F. A. The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies
description	Past studies revealed that capital structure and corporate governance are the main reasons for various financial crises. Since then, many studies have evaluated the consequences of both factors, particularly on the performance of corporations. However, the literature remains ambiguous about the impact of capital structure and corporate governance on corporate performance because most studies focus on a single measure of capital structure (total debt). The purpose of this study is to furnish incremental information about the interrelationship between corporate governance, capital structure, and firm performance using three measures of capital structure. Additionally, unlike most prior studies, this study has considered all categories of governance, namely board of director attributes, audit committee characteristics, and ownership. This study employs the agency and free cash flow theories in order to explain the inconsistency between reality and conventional beliefs about corporate capital policies. This provides a new perspective on the nature of the corporate capital structure and its association with corporate governance and firm performance. This study used balanced panel data, which included 528 non-financial Malaysian public listed companies from 2015 to 2019. Data were analysed using the Generalized Method of Moments estimations (GMM) to address the endogeneity issue. Generally, findings reveal a significant and positive influence on most corporate governance attributes on the performance of firms and their capital structures. The findings also revealed that board diversity is the most significant attribute that enhances the performance of firms. Malaysian companies achieve higher performance with smaller board sizes, more female directors, more board meetings, a larger audit committee size, higher audit committee independence, less director change (turnover), and fewer audit committee meetings. Additionally, the results of this study have confirmed the mediating role of the corporate capital structure in the relationship between corporate governance and firm performance. Consistent with the Pecking Order Theory, the results suggest that companies need to keep a lower level of debt in order to deal more efficiently with investment opportunities (using an internal source of capital) and also to improve their financial performance. Additionally, it is revealed that a lower debt level strengthens the corporate governance quality of companies so as to compensate for the agency costs rising due to excessive cash. Findings also show that capital structure and firm performance are negatively and significantly associated, which means that Malaysian companies with lower debt ratios have higher performance. This contributes to the body of knowledge by providing insights into the indirect role of various corporate governance attributes in enhancing the performance of companies in Malaysia. This study provides a solid practical implication for regulators and policymakers by indicating empirically that capital structure should be taken into account when structuring the monitoring mechanisms of firms to improve business performance. Finally, this study offers recommendations and directions for future research.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Khatib, Saleh F. A.
author_facet	Khatib, Saleh F. A.
author_sort	Khatib, Saleh F. A.
title	The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies
title_short	The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies
title_full	The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies
title_fullStr	The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies
title_full_unstemmed	The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies
title_sort	nexus between corporate governance, capital structure and firm performance of malaysian public listed companies
granting_institution	Universiti Teknologi Malaysia
granting_department	Azman Hashim International Business School
publishDate	2022
url	http://eprints.utm.my/108274/1/SalehF.A.KhatibPAHIBS2022.pdf.pdf
_version_	1818646937095634944

The nexus between corporate governance, capital structure and firm performance of Malaysian public listed companies

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