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Abstract

In the aftermath of the Asian financial crisis 1997-1998, there are signs that, corporate governance in Malaysia is gradually converging towards the Anglo-American model. Drawing on the institutional theory, this study investigates a previously unexplored phenomenon in corporate governance reformation, namely the directors’ attributes and the level of foreign equity ownership (FEO) in Malaysian companies. This study embraces an institutional theory to examine the antecedents of corporate governance reformation in attracting foreign investors in relation to the directors’ attributes. The study's hypotheses are tested using panel data derived from 1,836 observations performed throughout a span of a 12 year period, between 2000 and 2011. The generalised least square (GLS) method was employed to estimate the model after considering the existence of heteroscedasticity and serial correlation problems. Our results indicate that the level of FEO in Malaysian companies is significantly related to foreign directors and multiple-directorships. Interestingly, the results defy the significant relationships of outside directors as generally proposed in extant literatures. The findings from this study may have a wider impact on the regulator bodies in Malaysia, such as the Malaysian Institute of Corporate Governance (MICG), the Minority Shareholder Watchdog Group (MSWG), and other interested parties, in setting up a new policy, designing new rules and strengthening the existent regulations in terms of corporate governance for Malaysian companies in order to attract more foreign investors.

Keywords: Board of director, Corporate governance, Company ownership, Foreign equity ownership, Institutional theory.

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