A Review of Corporate Governance: Ownership Structure of Domestic-Owned Banks in Term of Government Connected Ownership, and Foreign Ownership of Commercial Banks in Malaysia

Rahayu Tasnim,Peong Kim,Devinaga Rasiah

doi:10.5171/2012.335681

Abstract

The Asian financial crisis of 1997 resulted in Malaysian commercial banks seeking to strengthen their corporate governance, transparency and disclosure levels. The aim of this research is to review corporate governance in relation to ownership structure of domestic owned banks in terms of government connected ownership and foreign ownership of commercial banks in Malaysia.This research has given a brighter insight into corporate governance and bank performance in selected Malaysian commercial banking institutions. The findings have also provided useful information to investors, bankers and regulators pertaining to the importance of the role of corporate governance practices in the Malaysian banking system and its performance. Different types of bank ownership have had different concerns about implementing corporate governance practices among commercial banks in Malaysia.

Highlights

The Malaysian banking system consists mainly of three types of institutions
The findings have provided useful information to investors, bankers and regulators pertaining to the importance of the role of corporate governance practices in the Malaysian banking system and its performance
This study examines the motivation of the prior studies for corporate governance and bank performance

Summary

Introduction

There are commercial banks (domestically- owned banks and foreign-owned banks), financial banks and merchant banks. Domestic commercial banks have the largest share of the market. Among these three types of institutions, the government control the largest bank and second largest bank; namely Maybank and Bank Bumiputra through a majority share (Detragiache and Gupta 2004). Foreign commercial banks held over 90 percent of the share of the banking market in 1957 when Malaysia became independent. Bank Negara Malaysia’s banking sector restructuring efforts was substantially completed. Danaharta completed its task of acquiring NPLs from the financial sector and was making significant progress in its recovery operations. Danaharta had been very successful in containing the rise of the NPLs in order for the banking system to function efficiently during the intermediation process (Koh 2004).

Methods

Results

Conclusion