1. Discuss the link between corporate governance and firm performance.

Include discussions on agency theory and its link to corporate

governance. Refer to Bhat (2016)
The link between corporate governance and firm performance is a crucial area of
study in the field of management and finance. Corporate governance refers to the
system of rules, practices, and processes by which a company is directed and
controlled. It involves the relationships among various stakeholders, such as
shareholders, management, employees, and the board of directors, and aims to ensure
accountability, transparency, and ethical behavior within an organization.
Firm performance, on the other hand, refers to the financial and non-financial
outcomes achieved by a company. It encompasses measures such as profitability,
market share, stock price, return on investment, and overall operational efficiency.
Numerous studies have examined the relationship between corporate governance and
firm performance, and the findings generally indicate a positive association between
the two.
One theoretical framework often used to analyze the relationship between corporate
governance and firm performance is agency theory. According to agency theory,
conflicts of interest arise due to the separation of ownership and control in
corporations. Shareholders, who are the owners of the company, delegate decision-
making authority to managers to act on their behalf. However, managers may not
always act in the best interests of shareholders, leading to agency problems.
Corporate governance mechanisms, including board structures, executive
compensation, shareholder rights, and disclosure requirements, are designed to
mitigate these agency problems and align the interests of managers with those of
shareholders. When corporate governance mechanisms are effective, they can reduce
agency costs and improve firm performance.
The study you mentioned, "Corporate governance in Malaysia: has MCCG made a
difference" by Padmanabha Ramachandra Bhatt (2016), investigates the impact of
corporate governance reforms in Malaysia. The author examines the Malaysian Code
on Corporate Governance (MCCG) and its influence on firm performance. The
MCCG is a set of guidelines and recommendations aimed at promoting good
corporate governance practices in Malaysian companies.
The research likely analyzes the extent to which the adoption and implementation of
the MCCG have led to improvements in corporate governance practices in Malaysian
firms. It may also examine the subsequent effects on firm performance indicators,
such as financial performance, market valuation, and risk management.

2. Discuss whether it would be practical to have an international code of

corporate governance. Refer to Davies and Schlitzer (2018)
Legal framework
some countries focus strongly on protecting the rights of the shareholders while some
countries had the weakest investor protection and the least developed markets
- each country have their own legal framework
- more concern on protecting creditor rights and law enforcement
- Austance, malaysia, south africa - make shareholder confidence

Corporate ownership structure

- every country have their own ownership structure
- HK more are family owned company (More large grp of public shareholders)
- Malaysia have more institutional ownership (group of ppl that have huge amount of
shares) - many government linked company (GLC) where gov has equity in GLC and
has interest o this
- other types of country more public shareholders
- variation of corporate structure makes us hard to have a common CG

Financial system

there is an effort to have a code of CG but have some limitations

- diff legal system
- diff banking system
- diff cultural
- diff ownership structure

3. Rankins – Contemporary Issues – page 214. Audit committees put risk

management at the top of their agendas.
a) Traditionally, audit committees have primarily focused on managing
financial reporting risk (i.e. risk of misstatements in financial statements)
and reviewing aspects such as internal control systems. Do you believe the
expansion of this committee’s role to consider business risk appropriate?
- is that appropriate for audit committee to tackle risk management
NO RIGHT OR WRONG ANS

important to concentrate on accounting management

Yes.
It is good if audit committee, internal auditor, external auditors, they emphasize on
risk involved in management
However, it actually diverse their main focus if auditors emphasize on practice (risk in
every department)
Internal auditors role is to ensure control within business operations is effective and
efficient because each department have different control, they have to think of method
to mitigate the risk
now (auditor and risk management team)
Company should have own risk management team to identify, mitigate and manage
the risk
This is because auditors are different from risk assessor

b) The extract notes a link between compensation structures within

companies and risk management. Explain how these are related.
ques: important to have compensation plan, explain how are these related
very important, is interrelated
exp:
if provide not attractive compensation plan, employee turnover rate will be affected
if employee turnover rate too high, operation will be affected, company cannot
operate effectively and efficiency
Affect reputation risk
PWC, EY: they give other benefits

4. Rankins – Contemporary Issues – page 224. The Individual must take

responsibility for doing the right thing.
a) This article discusses the issue of a code of conduct in corporate
governance. Discuss whether a code of conduct is necessary for good
corporate governance.
A code of conduct is indeed necessary for good corporate governance. It serves as a
set of guidelines and principles that define expected behavior and ethical standards
within an organization. Here are a few reasons why a code of conduct is important:
a) Setting boundaries: A code of conduct establishes clear boundaries for acceptable
behavior, ensuring that employees understand what is expected of them. It helps
prevent inappropriate actions and creates a positive and respectful work environment.
b) Compliance with laws and regulations: A well-implemented code of conduct
ensures that employees are aware of and adhere to legal requirements and industry
regulations. It helps mitigate legal risks and promotes ethical decision-making within
the organization.
c) Protection of reputation: Inappropriate behavior or misconduct can severely
damage a company's reputation, leading to financial and reputational losses. A robust
code of conduct acts as a preventive measure, fostering a culture of integrity and
responsible conduct that can enhance confidence in the organization.
d) Guidance for ethical decision-making: A code of conduct provides a framework for
employees to make ethical decisions in their day-to-day work. It helps them navigate
complex situations, encourages transparency, and promotes accountability.
e) Stakeholder expectations: Stakeholders, including investors, customers, and the
public, expect companies to operate with integrity and adhere to ethical standards. A
code of conduct demonstrates a company's commitment to responsible business
practices and can positively influence stakeholders' perceptions.
Overall, a code of conduct is an essential tool for promoting good corporate
governance by establishing clear behavioral expectations, mitigating risks, protecting
reputation, and fostering a culture of ethics and integrity.

b) The article states that it is impossible to legislate for ethics. Do you agree
with this? If this is the case, does this mean regulation is ineffective?
While it is true that ethics cannot be legislated in the sense that laws alone cannot
make individuals behave ethically, it does not mean that regulation is ineffective.
Regulations and corporate governance frameworks play a crucial role in creating a
structure and setting expectations for ethical behavior within organizations. Here are
some points to consider:
a) Establishing minimum standards: Regulations provide a baseline for ethical
behavior by defining legal requirements and standards that companies must adhere to.
They set the boundaries for acceptable conduct and ensure that organizations meet
their legal obligations.
b) Deterrence and accountability: Regulations create consequences for non-
compliance, which can act as a deterrent against unethical behavior. By enforcing
penalties and sanctions, regulators hold individuals and organizations accountable for
their actions, discouraging misconduct.
c) Promoting transparency: Regulations often require companies to disclose
information related to their governance practices, financial performance, and potential
conflicts of interest. This transparency helps stakeholders make informed decisions
and holds companies accountable to their obligations.
d) Providing guidance and best practices: Regulatory frameworks often include
guidelines and best practices that assist organizations in implementing effective
governance measures. These resources can help companies establish ethical cultures,
enhance risk management processes, and strengthen compliance efforts.
While regulations alone may not guarantee ethical behavior, they play a crucial role in
shaping organizational behavior, establishing standards, and providing a framework
for responsible decision-making. Ultimately, ethics should be ingrained in an
organization's culture, and individuals within the organization must take personal
responsibility for making ethical choices.