The development of corporate governance literature in Malaysia: a systematic literature review and research agenda

• DOI: https://doi.org/10.1108/CG-12-2020-0565
• Published date: 14 February 2022
• Date: 14 February 2022
• Pages: 1026-1053
• Subject Matter: Strategy,Corporate governance
• Author: Saleh F.A. Khatib,Dewi Fariha Abdullah,Ahmed Elamer,Saddam A. Hazaea

The development of corporate governance

literature in Malaysia: a systematic

literature review and research agenda

Saleh F.A. Khatib, Dewi Fariha Abdullah, Ahmed Elamer and Saddam A. Hazaea

Abstract

Purpose –This study aims to provide a comprehensive review of the existing literature on corporate

governance (CG) aspects of the Malaysian market. It offers insights into the phases of Malaysian CG,

identifiescrucial gaps in the literature and outlinesan agenda for impending research.

Design/methodology/approach –Following a systematicliterature review approach, a final sample of

125 studies from Scopus and Web of Science databases was used in this study. These studies were

selected based on quality assessment criteria. Then, the sample literature was evaluated in terms of

journals,methodology, theories, modelling,research outcomes and CG characteristics.

Findings –The results show that there is a growing interest among researchers to further explore CG

aspects in Malaysiadue to the continuous development of the Malaysian CG codes. Likewise,the review

reveals that the majority of prior studiesare quantitative and were carried out using archived data from

non-financial firms.Also, the existing literature has primarily focusedon the outcomes of CG, especially

firm performance.

Research limitations/implications –Overall, the results show that there is ample room for future

research. The present paper identifies a number of methodological problems and concerns, and

discusses theimplications of these problems, while also providingrecommendations for future research.

The main caveat is that the authors use scholarly papers published in academic journals only, but this

approachoffers them with opportunities for considerablefurther developments.

Originality/value –To the bestof the authors’ knowledge, this study contributesto the literature by being

the first of its kind to concentrate on the Malaysian context. It provides a comprehensive knowledge

assessmentof the MalaysianCG research and offersadvice regarding improvements in research, policy

and practiceby identifying possible knowledgegaps. Consequently, this studyprovides a cohesive story

of the past anda roadmap for future research on Malaysian CG.

Keywords Corporate governance, Firm performance,Corporate social responsibility, Earnings management,

Disclosure quality, Malaysia

Paper type Literature review

1. Introduction

The Securities Commission Malaysia has defined corporate governance (CG) as “the

process and structure used to direct and manage the business and affairs of the company

towards promoting business prosperity and corporate accountability with the ultimate

objective of realising long-term shareholder value while taking into account the interest of

other stakeholders” (MCCG, 2017). Similarly, Shleifer and Vishny (1997, p. 737) state that

“Corporate governance deals with the ways in which suppliers of finance to corporations

assure themselves of getting a return on their investment. How do the suppliers of finance

get managers to return some of the profits to them? How do they make sure that managers

do not steal the capital they supply or invest it in badprojects? How do suppliers of finance

control managers?”

Saleh F.A. Khatib is based

at Azman Hashim

International Business

School, Universiti Teknologi

Malaysia, Skudai, Malaysia.

Dewi Fariha Abdullah is

based at Azman Hashim

International Business

School, Universiti Teknologi

Malaysia, Skudai, Malaysia.

Ahmed Elamer is based at

Brunel Business School,

College of Business Arts

and Social Sciences,

Brunel University,

Uxbridge, Middlesex, UK,

and Department of

Accounting, Mansoura

University, Mansoura,

Egypt. Saddam A. Hazaea

is based at Yunnan

University of Finance and

Economics, Kunming,

China.

Received 20 December 2020

Revised 3 May 2021

18 September 2021

20 October 2021

14 November 2021

4 December 2021

19 December 2021

Accepted 23 December 2021

PAGE 1026 jCORPORATE GOVERNANCE jVOL. 22 NO. 5 2022, pp. 1026-1053, ©Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-12-2020-0565

Recent corporate scandals suggest that weak CG leads to fragile institutions and exposes

them to severe crises (Al Amosh and Khatib, 2021;Hazaea et al., 2021a). Malaysian

corporations are not an exception to that vulnerability, given they were severely affected by

both the 1997-1998 Asian financial crisis and 2007-2009 global financial crisis (GFC),

largely as a result of weak CG systems. Thus, CG has witnessed enormous developments

over recent decades (Alnabsha et al., 2018;Alshbili et al., 2019;Bufarwa et al.,2020;

Elamer et al.,2018,2021). For instance,Malaysia initiated the Malaysian Code on Corporate

Governance (MCCG) in 2000 to improve the principles, guidelines and governance

practices within the market to prevent such crises in future (MCCG, 2007). Consequently,

this has led to efforts to rectify and overhaul the entire corporate sector in Malaysia. The

introduction of MCCG was followed by an overwhelming number of studies on Malaysian

CG. These studies have confirmed the existence of a variety of previously explored

research themes. Prior research, however, has provided mixed empirical evidence relating

to the impact of CG on firm performance (Haniffa and Hudaib, 2006), dividend policy

(Benjamin, 2015), corporate social responsibility (CSR) (Ho and Taylor, 2013) and financial

reporting quality (Mohamad-Noret al.,2010).

Despite inconclusive findings in prior empirical studies, and the growing interest in the field,

there have been no serious efforts to systematically review the literature related to CG in

Malaysia (Annuar, 2014), and this gap is the key motivation for our study. The limited set of

reviews on the Malaysian context have placed greatfocus on certain governance attributes,

such as ownership mechanisms (Kim et al., 2012), leadership structure (Yasser and Al

Mamun, 2016), family control (Ng et al.,2014) and audit committee (Rahim et al.,2015),

while other scholars have concentrated on the general development of CG in the Malaysian

market (Alnasser, 2012;Liew, 2007;Rachagan and Kuppusamy, 2013). Additionally, Shariff

et al. (2018) conducted a review on CG best practices of small tou rism firms, and Khatib et al.

(2020a) presented an evaluation of the relationship between several go vernance attributes

and capital structure. However, most of these reviews were specif ic to a single governance

mechanism (i.e. audit committee) or outcomes (i.e. capital structure), and none c onsidered all

aspects of the CG literature. Thus, taking this as a valuable opportunity, we present this paper

to answer the following questions.

RQ1. What does the overall literature show regarding the current state of corporate

governanceresearch?

RQ2. Which themesrelated to corporate governance have been investigated?

RQ3. Which governanceattributes are used by scholars to studycorporate governance?

RQ4. What are the research gaps and potential future research directions for corporate

governancein Malaysia?

To address these questions, we provide a systematic literature review and comprehensive

analysis of the current state-of-the-art literature and do not limit our investigation to

particular governance mechanisms, outcomes or periods (Gonzales-Bustos and

Hern

andez-Lara, 2016;Li et al., 2020). It has been suggested that systematic literature

reviews help to synthesize research in a reproducible, transparent and systematic manner

to identify significant gaps, contribute to theory development and provide directions for

future research (Endenich and Trapp, 2020;Pedrini and Ferri, 2019), hence the need for

such a study in the context of Malaysian CG.

This research contributes to the literature by being the first of its kind to focus on the

Malaysian market. The study provides an up-to-date systematic assessment of the existing

research that addresses Malaysian CG. Unlike the traditional approach of a “narrative”

review, this study evaluates the relevant research articles using a systematic approach

while also offering multiple recommendations for future research. Using a large number of

prior studies (i.e. 125 articles), the present paper describes key theoretical and

methodological trends in recent research on Malaysian governance codes. It also adds to

VOL. 22 NO. 5 2022 jCORPORATE GOVERNANCE jPAGE 1027