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THE ROLE OF INDEPENDENT NON-EXECUTIVE DIRECTORS(INED) IN ENHANCING THE FIRM PERFORMANCE FROM THE PERSPECTIVE OF EXECUTIVE DIRECTOR AND COMPANY SECRETARY


The Asian Financial crisis in 1997 had increased the awareness amongst corporation on the importance of having a good corporate governance system. In Malaysia, to enhance good corporate governance practice, MCCG 2012 had recommended the appointment of independent non-executive director (INED) on the board. However the flexibility that being offered by the Code make its recommendation highly questionable as it will open for the manipulation by the companies and thus lead to the recurrence of corporate scandal. Thus, this study being carried out in order to examine whether the roles of INED will contribute towards firms’ performance by focusing on specific roles, namely; formulating strategy, provides an independent view and expert advice and acts as a monitoring mechanism on the board. For the purpose of this study, a cross-sectional method was used where 143 questionnaires were distributed to board of director; executive director and company secretaries of public listed companies (PLC). To determine whether the presence of the INED influence the firms’ performance, mean statistics analysis had been used, while the correlation analysis is run to test the relationship between the INED roles and firms’ performance. Lastly, regression analysis is used to identify the main INED role that significantly influences the firms’ performance. From the analysis, the results showed that the INED directors’ role, such as the monitoring was positive and significantly influence firm performance. The formulating strategy and providing an independent view and expert advice roles on the other hand have a negative relationship with the firms’ performance. Based on the finding from this study, it is recommended for the INEDs to enhance their monitoring role as this is the role that can enhance the firms’ performance. The presence of INED on the board may help companies to enhance their performance, so more stringent strategies need to be formulated by government and regulators to ensure that the appointment of INED on the board not merely to comply with the regulation or due to the conformance sake and need to actively address the importance of INED in ensuring companies are truly embracing the corporate governance spirit.

  • NOOR HAZLIZA BINTI AZAHARI
  • January 2016
  • Master of Corporate Administration (MOCA)/GRAD ICSA
  • Shah Alam, Selangor
  • BILIK THESIS FSPPP
  • 22
  • Completed
Supervisor

List of Supervisor

PROF MADYA DR NORZIANA BINTI LOKMAN

Senior Lecturer

Dr. Norziana Lokman is a senior lecturer at Faculty of Administrative Science and Policy Studies, Universiti Teknologi MARA Shah Alam Selangor.

norzianadr norzianadr ziana
  • FACULTY OF ADMINISTRATIVE SCIENCE AND POLICY STUDIES
  • 603-5543 5867
  • PhD in Corporate Administration/Corporate Governance
About

DiTIS is a short form of FSPPP’s Dissertations and Theses Inventory System. Since the establishment of FSPPP, the faculty has produced volumes of post-graduate and undergraduate dissertations and/or theses. Therefore, there is a dire need to establish a database to manage these high volumes of dissertations and theses.

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