Corporate governance, risky business and construction industry: a divergence between Bursa and Construction Industry Development Board (CIDB) Klang Valley, Malaysia

Abstract

PurposeThis study aims to examine the association between corporate governance mechanism and firm performance measured by return on assets (ROA). The question is whether an effective corporate governance mechanism is able to increase the firm performance of Bursa and Construction Industry Development Board (CIDB) Klang Valley, Malaysia. The main purpose of this study is the in-depth analysis of the corporate governance mechanism and construction industry Malaysia via Bursa and CIDB.Design/methodology/approachFollowing the primary and secondary data comparative approach, data are collected from 46 listed construction companies and 250 CIDB-registered SMEs for the financial year 2015. Descriptive statistics, Pearson correlation test are reported, and model estimation is performed using logistic regression.FindingsThe empirical outcome shows that the corporate governance mechanism is significant in case of the CIDB Malaysia-registered SMEs. While, it has insignificant impact on firm’s performance for Bursa Malaysia.Practical implicationsThis paper offers evidence specifically for Bursa and CIDB Malaysia construction industry. It can also provide guidance to the board of directors for the subscription of shares under the corporate governance measures at Bursa Malaysia. The findings also suggest that CIDB should increase awareness regarding institutional investment to assist the securities market to develop further.Originality/valueThis study gives an indication about corporate governance, specifically for the CIDB-registered SMEs and Bursa Malaysia. It also discusses the matter of firm performance under the light of corporate governance.