Abstract: Malaysian Government–linked Companies (GLCs) is defined as a business entity where the government has a direct controlling stake. Business element incorporates in the definition exhibits that there is a need for GLCs to has a profit motive, while at the same time, be part of government policies in developing the nation, as the government owns it. Despite this, GLCs presences in the economy are significant, with the market capitalization of USD1.7 billion. Due to GLCs conflicting objectives and significant presence in the market, issues of its corporate governance and performance are often debated among scholars. The Asian Financial Crisis 1997 has badly hit GLCs performance and poor governance is seen as the cause. Therefore, the government embarked a 10-year transformation program known as Government-linked Companies Transformation Program (GLCTP) that ended in 2015, among others to improve GLCs governance. Other than this, New Economic Model (NEM) and government policy on women directors on corporate board were introduced in 2010 and 2011 respectively. Hence, the current study aims to see the impact of government policies on the improvement in governance of all listed GLCs by assessing their board structure before and after the program through a selection of 29 GLCs that were listed on the Bursa Malaysia between 2004 and 2015. A further analysis was done to compare the board structure of GLCs with non-GLCs by using a control sample of 29 companies with a government shareholding of less than 5%. For the first aim of the study, the finding reveals that GLCs board size, the number of independent and executive directors have shown to have insignificant changes between 2004 and 2015. However, women, politician/government official/ex-government official and professional directors on GLCs board exhibit significant changes in numbers between the two years. The insignificance difference on board size, a number of independent and executive directors of GLCs between 2004 and 2015 is because these criteria have already met the directive of the Listing Requirement (LR) of the Bursa Malaysia, Malaysia Code on Corporate Governance (MCCG), GLCTP and NEM. The finding concludes that government policies such as the GLCTP, NEM has enhanced the GLCs board structure in 2015, compared with 2004. Though the percentage of women on board has not achieved 30% as announced by the government, the increased in numbers compare to 2004 has shown an improvement in compliance with the policy. In comparing board governance between GLCs and non-GLCs, the finding release that, except for women on board criteria, the rest are significantly difference between GLCs and non-GLCs. The difference in a number of politician/government official/ex-government official and professional directors on the board of both GLCs and non-GLCs is due to the government interference in GLCs. However, the number of women directors in both companies has no difference, implying that non-GLCs are also accepting government policy and implement it in their board structure. This empirical study provides information on the impact of the government program in improving governance of GLCs that is crucial to its performance and market perceptions.
Keywords: government ownership, agency theory, corporate governance, Malaysia, transformation program.
Title: THE IMPACT OF GOVERNMENT POLICY ON THE GOVERNANCE OF MALAYSIAN GOVERNMENT-LINKED COMPANIES
Author: Hartini Binti Mohd Nasir
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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