Corporate Governance and Financial Performance: A Case Study in the Pharmaceutical Sector in Malaysia

Abstract

The introduction of the Malaysian Code of Corporate Governance has been progressively updated since its inception in the year 2000 and the latest update in the year 2021, proves that the government of Malaysia has been serious in regulating to ensure that the companies in Malaysia have been compliant with good corporate governance practices. Observing that it is an evergreen issue and to have more updated research, this study evaluates factors that could influence the effectiveness of corporate governance of five pharmaceutical companies listed in Malaysia and its relationship with the financial performance for the period of 2017 - 2021. The methodologies that have been employed for this study are descriptive statistics, non-parametric correlations, scatter plots and regression linear. The findings reveal that variables of board size, board independence, and disclosure of sustainability reports have correlations with the financial performance measured by the return on assets. However, the disclosure of sustainability reports is the only variable that has a significant correlation with ROA whereas board size and board independence do not possess similar relationships. For a better representation of the results’ precision and robust findings, it is recommended to have a longer study period than five years and a larger sample size by extending it to other sectors.