Board Composition and Companies' Performance: Does Political Affiliation Moderate the Relationship?

Mike Siew Wei Leong, Anand Paramasivam, Sheela Sundarasen, Usha Rajagopalan
2015 International Journal of Business and Management  
Board composition is one of the distinct characteristics of Governance that is believed to contribute significantly to firm value. This study examines the impact of board composition, presence of nomination, audit and remuneration committees on companies' performance. Additionally, the moderating effects of political affiliation on the relationship between board composition and companies' performance is also tested. A sample size of 2280 companies from Bursa Malaysia for the period 2010 to 2012
more » ... period 2010 to 2012 is used. Hypotheses are tested using multiple linear regressions. The results indicate a positive relationship between board size and companies' performance but a negative relationship is noted between independent directors and performance. No significance is noted for non-executive directors whilst the presence of committees indicates mixed results. As for political affiliation, it negatively moderates the relationship between independent directors and companies' performance. These empirical evidences are in line with the Agency Theory, suggesting that board composition, presence of committees and politically affiliated members in the board do have an impact on companies' performance.
doi:10.5539/ijbm.v10n10p216 fatcat:uixfqkiohzgmdb6awfp6rxn3du