DO MUSLIM DIRECTORS INFLUENCE FIRM PERFORMANCE? EMPIRICAL EVIDENCE FROM MALAYSIA

Abstract

This study examines the impact of several corporate governance
mechanisms on the performance of firms in Malaysia. Giving
particular attention on board diversity, this study looks into the
impact of Muslim directors in the board of directors (BoD) on firm
performance. It is found that the presence of Muslim directors in the
BoD does have a significant impact on the performance of the firms
and can bring the firm to its utmost performance. Board
independence seems to coexist with CEO duality in pursuing
maximum firm value and directors’ remuneration does not seem to be
the driver and motivator to achieve good firm performance. Board
size is also taken into consideration when devising corporate
governance structure where the larger the size of the board the better
performance it is for the firms. Policy makers and other responsible
players should take into account the mechanisms discussed in this
study when structuring corporate governance. This study fills the gap
and contributes significantly to the literature by proving extensive
findings with regards to the impact of corporate governance on
firms’ performance especially the presence of Muslim directors in
BoD in Malaysia.