Reformation of corporate governance in Malaysia : do changes in audit and accountability practices increase institutional performance?

Abstract

Following a sequence of financial crises around the world, a series of corporate governance codes were issued concerning best practice with regard to corporate governance reformation. Central to these codes was the aim of the government to create investor confidence, to raise the standard, drive corporate governance reforms and use as a benchmark monitoring and implementing as corporate governance practices and policies at the corporate company level. The Malaysian government is committed to ensure that corporate companies demonstrate a track record of good governance in order to attract and retain long-term investors. Therefore, after seven years, the first Malaysian Code on Corporate governance (MCCG) was introduced in 2000, while the revised MCCG was introduced in 2007. The amendments of MCCG 2000 involved the components of audit committees and board of directors. It was aimed to improve the quality of audit committees and board of director’s functions among Publicly Listed Companies (PLCs) in promoting accountability and high levels of protection for the investor. This article aims to examine the effect of the Malaysian Code on Corporate governance on audit and accountability practices by comparing practices prior to, and after the implementation of the Code. Furthermore, the relationship between changes in audit and accountability practices and institutional performance in terms of corporate governance reformation is also examined.