Frameworks of study and variables in the economy

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Hypothesis Development

The importance of corporate governance for Asian countries was emerged in1997 when a financial crisis in Japan was expanded to the countries in Asia pacific region (Sueyoshi, Goto, and Yusuke, 2009). Since many researches were conducted to explore the relationship between corporate governance and company performance in Asia along with the USA. However, as mentioned before, one of the most important issues in corporate governance discussion is agency problem (Shakir, 2006) and it means when ownership and management team are separately from each other, agency problem will show its effects.

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This situation was explored in Zhuang, Edwards, and Capulong study (2001). They tried to find the effect of monitor managers and to implement control; therefore managers act in the best interest of companies owners (shareholders). According to Dalton, Daily, Ellstrand and Johnson (1998) agency problem is the most identified theoretical perspective which is explored in corporate governance studies. However, according to Bebczuk (2005), corporate governance can affect companies’ performance because of agency problem which is a result of an inconsistency of interest between shareholders and management. Hence, Bebczuk (2005) study went through the Argentina’s companies to explore the role of corporate governance and its effects on corporate performance. Some of other researchers who worked on this relationship were Chen (2005) in Taiwan, and Che Haat et al. (2008) in Malaysia. Therefore, based on the priors study, the first hypothesis for this study can be developed as bellow:

There is a significant relationship between corporate governance and performance of the Malaysian listed companies.

In term of capital structure there are few studies not only in Malaysia, but also elsewhere that their purpose is to explore the corporate governance and capital structure.

As a recent effort, Saad (2010) explored the commitments level of Malaysian listed companies to code of corporate governance in Malaysia; then, the effects of these commitments on the capital structure was examined. Existing the relationship between corporate governance and the capital structure was proved in Saad (2010) study. Priors to Saad (2010) study, Bhagat and Bolton found relationship between corporate governance and capital structure between companies in the USA. Following the previous studies, in this study the second hypothesis is defined as bellow.

There is a significant relationship between corporate governance and capital structure of Malaysian listed companies.

Sample Selection

To achieve the best results, the companies listed in Bursa Malaysia were selected to find their level of commitments to the corporate governance code in Malaysia, and the effects of these commitments on their performance and the capital structure decisions.

Secondary data will be used in this research and Bursa Malaysia website and companies’ annual reports can be sources of data for this research.

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