The effect of board of directors and audit committee characteristics on firm performance : evidence from Malaysia

Corporate governance issues are under the attention of the researchers for over three decades due to the increasing global economic crisis. Hence, this study attempts to contribute towards literature by investigating relationships of corporate governance and firm performance in Malaysia as a developing country. In particular, the study investigates the relationship between the board of director’s characteristics and the audit committee characteristics and the performance of non-financial listed companies (excluding financial companies) in Malaysia for the two years (2014 and 2015). The model of this study is theoretically based on the agency theory. To examine the
conceptual model, the required data were gathered from the annual reports of top 100 non-financial listed firms in Malaysia. In analyzing the data, this study utilized the liner multiple regression by taking the sample of 100 companies with 200 observations in order analyze the relationship between board of director’s characteristics and the audit committee characteristics and the performance (ROA and Tobin`s Q). Moreover, this study used firm size and leverage as control variables. Based on the liner multiple regression results that was used to examine the effect of the predictors of the firm
performance measured by Return on Assets (ROA) and Tobin-Q. The statistical results showed that board size and foreigner board members were a positive determinant of Tobin-Q. While, the government link of board members was negative determinants of
Tobin-Q. On the other hand, the government liking of the board and the audit committee meeting were negative predictors of ROA. While, the board size was a positive predictor of ROA. Besides providing suggestions for future research directions, this study also provides several recommendations for regulators, companies, stakeholders and in
particular, the shareholders.