The Influence of Board Governance on Operating Performance of Malaysian IPOs Based on Market Size
DOI:
https://doi.org/10.52962/ipjaf.2023.7.3.148Keywords:
Board characteristic, IPOs, operating performance, board diversity, board size, firm sizeAbstract
This study illustrates the significance of comprehending board governance by examining the relationship between director characteristics and the operating performance of Malaysian IPO firms. The selected firms in the sample are categorized based on market capitalization to enhance the study's rigor. Board governance is represented by board diversity and structure as independent variables and operating performance as a dependent variable. Operating performance is measured by earnings before interest and tax to total assets (EBIT/A). The findings of descriptive analysis show that Malaysian IPOs' operating performance before the IPO is better than during the IPO year, and the performance declines further after the IPO year. Several directors’ characteristics have a significant relationship with post-IPO operating performance. When the dependent variable is EBIT/A, board size and the number of independent directors are significantly and negatively related to operating performance. These results suggest that more directors and independent directors do not bode well for firm performance for small-size firms, indicating potential differences in the effectiveness of corporate governance practices between Malaysia and other developed countries. On the other hand, variables such as the size of the board and age diversity exhibit significance for large firm’s size. On the other hand, variables such as postgraduate education level, gender diversity, age diversity, and family ownership generally do not exhibit a significant relationship with operating performance. This study extends the current literature by inserting a comprehensive set of directors’ profile variables.
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