Corporate governance compliance versus syaria' compliance and its link to firm's performance in Malaysia

Abstract

The purpose of this study is to investigate level of compliance by corporate governance (CG) code of best practices and sharia' principles among public listed companies in main board of Bursa Malaysia and to provide insights view in determining significance association between the corporate governance and sharia' compliance with firm's performance. Corporate governance compliance was measured by three board of directors (henceforth; BOD) facets; (i) director's remuneration, (ii) directors training and (iii) number of family members. Meanwhile, syaria' compliance is based on six proxies, (i) riba, (ii) gambling, (iii) sale of non halal product, (iv) conventional insurance, (v) entertainment and (vi) stockbroking. The data are gathered from the analysis of companies' annual report and Thompson DataStream for a sample of 147 companies (for corporate governance compliance) and 36 companies (for syaria' compliance) over the period of 2003 to 2007. The study employs multiple regression analyses, independent sample T-test and Pearson correlation on the hypotheses tested. The preliminary results reveal most of the company has complied well with the code of best practices and syaria' principles and there is a significant association to the firm's performance besides syaria' compliance firms show a better performance compared to corporate governance compliance firms.