Abstract
The purpose of this study is to investigate the effect internal and external governance have on corporate governance effectiveness in highly-condensed family ownership structures in Malaysia. The establishment of RMCCG (2007) focuses more on the roles of audit committee independence adopted from developed countries' corporate governance standards. However, given the highly concentrated ownership structure in Malaysia, independence directors' fiduciary roles may be comprised as family firms' attempts to meet stakeholders' expectation. The sample of this study is from 1,206 firm level observations between the years 2004 to 2009 of firms listed in Bursa Malaysia. Our findings indicate that external governance as measured by stock market informativeness influences earnings management. Our research offers insights into the importance of external governance factors such as stock market volatility and market efficiency in promoting good governance in Malaysian family firms.
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