The moderating effect of ownership structure towards the relationship between corporate governance and firms’ performance of Malaysian construction sector

The global financial crisis and political risk are negatively contributing to the weak financial performance of the construction industry through high commodity costs. This leads to a drastic decline in the share prices of construction firms. This research investigates the impact of ownership structure on corporate governance and the performance of the public listed construction firms in Malaysia. This study examines the relationship between corporate governance (board gender diversity, audit quality, voluntary corporate disclosure and board expertise) and profitability of Malaysian construction firms. This study determines the moderating effect of managerial and family ownerships on the linkage between corporate governance and firm’s financial performance of Malaysian construction firms. Pooled and panel data covering the period 2000-2018 from 51 listed construction firms were used for the data analysis. This study employed secondary financial data on variables of corporate governance, ownership structures and the firm’s profitability that are based on the compilation of hand-collected 19 years’ annual reports from Bursa Malaysia. The results reveal that audit quality, voluntary corporate disclosure and board expertise significantly impact the performance of the public listed construction firms in Malaysia. Managerial ownership strengthens the relationship between audit quality and the firm’s performance. However, managerial ownership weakens relationships between the firm’s performance and board gender diversity, voluntary corporate disclosure and board expertise. Conversely, family ownership weakens the effect of board expertise on the firm’s performance. Moreover, family ownership moderates the relationship between board gender diversity, audit quality, voluntary corporate disclosure and the performance of the public listed construction firms in Malaysia. By employing the agency theory as the underpinning theory, the empirical results contribute to the advanced body of knowledge that family ownership is vital as a moderator between board gender diversity, audit quality, and voluntary disclosure and the performance of public listed construction firms in Malaysia.