1.4 Research Questions
This study intends to
answer the following research questions
1. What is the extent
of corporate govemance disclosure in the annual report of public listed
companies in Malaysia ?
2. Would companies with more corporate governance disclosure
as indicated by higher corporate governance score exhibits higher level of firm
3. would companies with more corporate governance disclosure
as indicated by higher corporate governance score exhibits higher level of
return on equity?
1.5 Research Methodology
Based on the research
questions outlined above, this study uses a corporate governance index to
measure the corporate governance level of the sample of companies selected. The
index consist of attributes which measure corporate governance practise of
companies based on disclosure made in the annual report. Each company would be
assigned score according to their disclosure level. The scores (both in raw and
weighted form) are analysed using descriptive analysis to determine the extent
of corporate governance disclosures among the selected companies. Subsequently,
the scores are correlated and regressed against the firm value (as measured by
Tobin’s Q) and return on equity. This is to examine the association and the strength of the relationship between
corporate governance and financial performance.
1.6 Scope of the study
The sample companies for this study are drawn from the top
100 companies traded in Bursa Malaysia Berhad according to their market
capitalisation or 23 December 2003. The rationale for this lies on the fact
that these companies forms a majority of volume of shares traded in the stock
exchange and hence they are expected to practice a high level of corporate
governance The 2003 annual reports of these companies were used to extract
information regarding their corporate governance practice. The year was chosen
as this is the 2003 latest annual report available for all the companies in the
sample and furthermore, it is assumed that the companies would have fully
adjusted to the revamped listing requirement implemented by Bursa Malaysia
Berhad in regard to corporate governance disclosure which became effective on
1st January 2001.
1.7 Limitation of the study
The study is shadowed
by two major limitations. First, the usage of corporate governance index which
is open to individual biasedness and subjective assessment. Secondly, the
financial performance indicator used in the study may not highlight the
holistic financial health of the company.
1.8 Organization of the Study
The study is divided
into five chapters.