Network governance in government‐linked companies (GLCs) and non‐government‐linked companies (NGLCs) in Malaysia

Abstract

Purpose

This paper aims to investigate whether or not there exists a relationship between network governance structures in GLCs and NGLCs and performance in Malaysia. In pursuing this objective, the study will explore whether the structures are significantly different and, if so, will seek to establish whether the relationship between their structures and performance of the two groups differs.

Design/methodology/approach

The study adopts a matched‐pair analysis between GLCs and NGLCs in terms of board listing, types of industry and paid‐up capital. All data related to variables were collected mainly from the annual reports of companies and the Bursa Malaysia websites. Besides paired sample t‐tests, univariate tests were also conducted to establish whether there is a statistically‐significant relationship between each independent variable and firm performance measured by either ROA or ROE.

Findings

The results showed that there were statistically‐significant differences for both network governance structures of senior government officers (SGO) and politicians (POL) as directors between GLCs and NGLCs for the period under study. Therefore, the first hypothesis of significant differences between the network governance structures of GLCs and NGLCs is fully supported. However, the presence and contribution of both SGO and POL to firm performance are much more noticeable in NGLCs compared to GLCs. BSZ is generally positively correlated with performance and this relationship is stronger for GLCs than NGLCs. As for RDU, no statistically‐significant relationship was found in all years. This indicates that there is no clear indication of any relationship between RDU and performance measured by ROA and ROE in all groupings of companies.

Research limitations/implications

It is impossible to get an exact pair of GLCs and NGLCs companies. However, both groups of companies have been paired as close as possible based on their paid‐up capital. The research was conducted in a period of three years only and before the transformation process of GLCs. As such, the findings might not reflect the general long‐term performance of GLCs.

Originality/value

This paper contributes to the literature as it examines the relationship between network governance variables to firm performance in the context of GLCs and NGLCs in Malaysia.

Citation

Hamid, A.A. (2011), "Network governance in government‐linked companies (GLCs) and non‐government‐linked companies (NGLCs) in Malaysia", Journal of Financial Reporting and Accounting, Vol. 9 No. 1, pp. 54-73. https://doi.org/10.1108/19852511111139804