Abstract
This paper was designed to understand the implications and significance of management ethics over stock performance in Malaysia. The stock performance was measured using Return on Equity (ROE), Return on Asset (ROA), Earnings Per Share (EPS) and Price Earnings ratio (PE). A scorecard method used in ASEAN Corporate Governance report 2014 has been used to rank the firms based on their ethical performances. The published rankings for top 20 firms with good corporate governance are used as measure of management ethics. The theoretical relationship between shareholder’s wealth, management ethics and efficient market hypothesis explains how management ethics impact the stock performance. The findings could be used to understand how shareholders could be affected by the managers’ ethical or unethical behavior.
Highlights
Businesses in capitalism world follow the shareholders’ wealth maximization model
Hypothesis 1, Ha1: There is a significant relationship between good management ethics and the stock performance
This research has met its stated objectives and aims in providing a study that provides a better understanding towards management ethics in Malaysia
Summary
Businesses in capitalism world follow the shareholders’ wealth maximization model. The business practices differ among the various firms and they follow different ethical and unethical approaches to maximize shareholder’s wealth. The definition of business ethics is highly abstract and several academicians refer to it in a different manner, typical definition refers to the rightness and the wrongness of the behavior. As stated by the famous economist Milton Freidman “There is only one social responsibility of business, to use its resources and engage in activities designed to increase its profits” [1]. In past 30 years’ business ethics has been a separate discipline in its own right [2]. Firms like Enron, WorldCom and Barings Bank were subject to suspicious, unethical and scandalous activities [3]. The ultimate impact of unethical activities conducted by these companies was eventually born by the society and the investors [4]
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