The relationship between corruption risk, corporate governance mechanisms, and firm performance in Malaysia

The issue of corruption is extensive and proliferate as a systemic phenomenon that may distort firm’s success in Malaysia. Therefore, firms have enormous potential for establishing strong corporate governance systems to alleviate the harmful effect of corruption, and, in turn, improve their performance. Hence, the objective of this study is to examine the relationship between corporate governance mechanisms, particularly top management team (TMT) attributes and ownership structure with firm performance among public listed firms in Malaysia. Furthermore, it investigates the moderating effect of corruption risk on the relationship between corporate governance mechanisms and firm performance. The motivation for this study was driven by the mixed and inconclusive findings of previous research works on the relationship between corporate governance mechanisms and firm performance. Moreover, there are few studies on the moderating effect of corruption risk in terms of the relationship between corporate governance mechanisms and firm performance. This study employs panel data regression analysis with 2,925 firm-year observations of non-financial firms listed on Bursa Malaysia over the period 2018 to 2022. The findings document that TMT financial expert, TMT tenure, and foreign ownership are significantly related to firm performance. The findings also report that corruption risk has a moderating effect on the relationship between TMT women, TMT political connections, family ownership, foreign ownership, and institutional ownership with firm performance. However, the findings indicate an insignificant relationship between TMT international experience, TMT women, TMT political connections, TMT age, family ownership, and institutional ownership with firm performance. This study contributes to the growing body of knowledge by using the resource dependence theory and agency theory. Overall, this study offers a reference point for the relevant parties – business players, regulatory bodies, standard setters, and policymakers – towards improving firm performance and corporate governance practices in a highly corruption