Description:
In 2001, the Malaysian Code on Corporate Governance (MCCG) became an integral part of Bursa Malaysia Listing Rules, which requires all listed firms to disclose the extent of compliance with MCCG. Our panel analysis of 440 firms from 1999 to 2002 finds that the corporate governance reform in Malaysia has been successful, with a significant improvement in governance practices. The relationship between ownership by Employees Provident Fund (EPF) and corporate governance has strengthened in periods subsequent to the reform, in line with the lead role taken by EPF in establishing the Minority Shareholders Watchdog Group. The implementation of MCCG has a substantial effect on shareholders' wealth, increasing stock prices by an average of about 4.8%. Although there is no evidence that politically connected firms perform better, political connection has a significantly negative effect on corporate governance, which is mitigated by institutional ownership