Title: Director independence and performance of listed companies: evidence from Malaysia

Authors: Fairuz Ramli, Anuar Nawawi, Rashid Ameer

Addresses: Faculty of Business Management and Professional Studies, Management and Science University, Shah Alam, Malaysia. ' Faculty of Accountancy, Universiti Teknologi MARA, Shah Alam, Malaysia. ' Faculty of Accountancy, Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Malaysia

Abstract: This paper investigates the relationship between director independence and firm performance, as well as ownership of firms and firm performance in Malaysia. We find that independent outside directors and foreign directors have a significant positive effect on firm performance after controlling for the influence of other corporate governance variables such as firm ownership and board sizes. The study demonstrates that when a critical mass of outside directors| independence is achieved, this has a significant economic impact on the firm performance. The results have implications for rethinking board composition requirements in the emerging markets.

Keywords: corporate governance; board composition; director independence; company performance; firm ownership; Malaysia; independent directors; external directors; foreign directors; critical mass; economic impact; emerging markets; business governance.

DOI: 10.1504/IJBGE.2010.035601

International Journal of Business Governance and Ethics, 2010 Vol.5 No.4, pp.280 - 300

Published online: 01 Oct 2010 *

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