An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies

Purpose – The purpose of this study is to ascertain the control role of independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs), as prescribed in the Malaysian Code on Corporate Governance (MCCG).The MCCG (2000) requires substantive involvement of INEDs on the audi...

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Main Authors:	Annuar, Hairul Azlan, Ab. Rashid, Hafiz Majdi
Format:	Article
Language:	English English
Published:	Emerald 2015
Subjects:	HF5601 Accounting. Bookkeeping
Online Access:	http://irep.iium.edu.my/43919/ http://irep.iium.edu.my/43919/ http://irep.iium.edu.my/43919/1/MAJ-09-2013-0936_-_Managerial_Auditing_Journal.pdf http://irep.iium.edu.my/43919/4/43919_An%20investigation%20of%20the%20control%20role%20and%20effectiveness%20of%20independent%20non-executive%20_SCOPUS.pdf

id	iium-43919
recordtype	eprints
spelling	iium-439192017-11-22T01:39:46Z http://irep.iium.edu.my/43919/ An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies Annuar, Hairul Azlan Ab. Rashid, Hafiz Majdi HF5601 Accounting. Bookkeeping Purpose – The purpose of this study is to ascertain the control role of independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs), as prescribed in the Malaysian Code on Corporate Governance (MCCG).The MCCG (2000) requires substantive involvement of INEDs on the audit, nomination and remuneration board sub-committees. The study also examines the effectiveness of INEDs in discharging their monitoring roles in these sub-committees. Design/methodology/approach – A qualitative research design consisting of a series of interviews with board members of Malaysian-owned PLCs on the board of Bursa Malaysia was used. Findings – Interviews with 27 company directors reveal that, due to their independence, INEDs are crucial in safeguarding the interests of smaller investors if situations arise in which shareholders’ interests may be threatened. The interviews also disclose that the audit committee possesses the most authority among the sub-committees, as it derives its power not only from the Listing Requirements but also from statute, as well as being involved in areas of the company not traditionally associated with the committee. The study also reveals the differences in opinion between executive directors and INEDs with regard to the extent of INEDs’ effectiveness. Research limitations/implications – This research utilises interviews. Generalisation may be an issue when interviews are used as the method of inquiry. In addition, the sample is not random, as access to many directors is dependent on recommendations. In addition, the respondents have been consciously selected to cover various board positions, including independent and non-independent directors. Practical implications – The findings from this research suggest that INEDs are able to discharge their responsibilities in overseeing the conduct of executives and protecting the interests of investors. In addition, the interviews disclose that the effectiveness of INEDs depends on how non-executive directors view INEDs being on the board. Rather than focusing solely on their control role, INEDS are expected to have a more proactive and progressive role in ensuring sustainable growth and the expansion of the business entity. Originality/value – There are limited studies using qualitative research design in investigating the effectiveness of INEDs in the control role of the board in developing countries. Prior studies were predominantly based upon the experience of Western economies. Emerald 2015 Article PeerReviewed application/pdf en http://irep.iium.edu.my/43919/1/MAJ-09-2013-0936_-_Managerial_Auditing_Journal.pdf application/pdf en http://irep.iium.edu.my/43919/4/43919_An%20investigation%20of%20the%20control%20role%20and%20effectiveness%20of%20independent%20non-executive%20_SCOPUS.pdf Annuar, Hairul Azlan and Ab. Rashid, Hafiz Majdi (2015) An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies. Managerial Auditing Journal, 30 (6/7). pp. 582-609. ISSN 0268-6902 http://www.emeraldinsight.com/doi/full/10.1108/MAJ-09-2013-0936
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	HF5601 Accounting. Bookkeeping
spellingShingle	HF5601 Accounting. Bookkeeping Annuar, Hairul Azlan Ab. Rashid, Hafiz Majdi An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies
description	Purpose – The purpose of this study is to ascertain the control role of independent non-executive directors (INEDs) in Malaysian public listed companies (PLCs), as prescribed in the Malaysian Code on Corporate Governance (MCCG).The MCCG (2000) requires substantive involvement of INEDs on the audit, nomination and remuneration board sub-committees. The study also examines the effectiveness of INEDs in discharging their monitoring roles in these sub-committees. Design/methodology/approach – A qualitative research design consisting of a series of interviews with board members of Malaysian-owned PLCs on the board of Bursa Malaysia was used. Findings – Interviews with 27 company directors reveal that, due to their independence, INEDs are crucial in safeguarding the interests of smaller investors if situations arise in which shareholders’ interests may be threatened. The interviews also disclose that the audit committee possesses the most authority among the sub-committees, as it derives its power not only from the Listing Requirements but also from statute, as well as being involved in areas of the company not traditionally associated with the committee. The study also reveals the differences in opinion between executive directors and INEDs with regard to the extent of INEDs’ effectiveness. Research limitations/implications – This research utilises interviews. Generalisation may be an issue when interviews are used as the method of inquiry. In addition, the sample is not random, as access to many directors is dependent on recommendations. In addition, the respondents have been consciously selected to cover various board positions, including independent and non-independent directors. Practical implications – The findings from this research suggest that INEDs are able to discharge their responsibilities in overseeing the conduct of executives and protecting the interests of investors. In addition, the interviews disclose that the effectiveness of INEDs depends on how non-executive directors view INEDs being on the board. Rather than focusing solely on their control role, INEDS are expected to have a more proactive and progressive role in ensuring sustainable growth and the expansion of the business entity. Originality/value – There are limited studies using qualitative research design in investigating the effectiveness of INEDs in the control role of the board in developing countries. Prior studies were predominantly based upon the experience of Western economies.
format	Article
author	Annuar, Hairul Azlan Ab. Rashid, Hafiz Majdi
author_facet	Annuar, Hairul Azlan Ab. Rashid, Hafiz Majdi
author_sort	Annuar, Hairul Azlan
title	An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies
title_short	An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies
title_full	An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies
title_fullStr	An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies
title_full_unstemmed	An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies
title_sort	investigation of the control role and effectiveness of independent non-executive directors in malaysian public listed companies
publisher	Emerald
publishDate	2015
url	http://irep.iium.edu.my/43919/ http://irep.iium.edu.my/43919/ http://irep.iium.edu.my/43919/1/MAJ-09-2013-0936_-_Managerial_Auditing_Journal.pdf http://irep.iium.edu.my/43919/4/43919_An%20investigation%20of%20the%20control%20role%20and%20effectiveness%20of%20independent%20non-executive%20_SCOPUS.pdf
first_indexed	2023-09-18T21:02:29Z
last_indexed	2023-09-18T21:02:29Z
_version_	1777410716299427840

An investigation of the control role and effectiveness of independent non-executive directors in Malaysian public listed companies

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