Board of directors and corporate diversification in Malaysia

Abstract

This study provides evidence on corporate diversification in Malaysia. The attributes of board: board composition, board characteristic, board structure and board process are examined in focused and diversified companies. The board attributes are also tested to examine the relationship with corporate diversification level. With exception to board size and duality leadership structure, the practices of board attributes are not shown to be different in focused and diversified companies. In terms of relationship, only proportion of executive directors is found to have significant correlation with diversification level [measured by number of segments based on two-digit SIC and Herfindahl index (asset)]. Overall, the findings show that not all board governance attributes differ in corporate diversification status and level. The board effectiveness in monitoring corporate diversification is still unclear as diversification is not necessarily an inefficient strategy although it might be used for the benefit of decision agent.