by Zaini Embong*a, Ruhaznawati Md Radzib

aUniversiti Kebangsaan Malaysia, Malaysia; bPoliteknik Kota Kinabalu, Malaysia

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Abstract : Public reprimand is a form of enforcement actions taken by Bursa Malaysia against companies that violate or breach listing requirements. As stated in the Bursa’s website, enforcement actions are taken to deter future breach, enhance greater market understanding and awareness as well as to promote and cultivate good standards of corporate governance and business conduct in the market. Enforcement actions hence can be seen as educating mechanism to market players to abide by the rules and regulations prescribed by the authority. Corporate governance is a mechanism put in place to ensure that companies are managed to the best interest of shareholders and investors. Prior studies that investigated the relationship between corporate governance mechanism and enforcement actions found the relationship to be significant. Prior findings generally indicated that there were differences in the characteristics of board of directors between companies that were subjected to enforcement actions and those which were not. However, none of the studies were done in Malaysian setting. The nature of capital market and the rules and regulations of relevant authority are different from country to country. Hence, it is important to investigate whether enforcement actions, specifically public reprimand by Bursa Malaysia is related to corporate governance mechanism. When companies were publically reprimanded, their reputations and most often share prices will be affected. This in the end compromises the wealth of shareholders. If actions were not taken by the relevant authority, confidence in the market may subside and this will be detrimental to the development of capital market. Besides investigating whether corporate governance mechanism, in specific board characteristics is related to public reprimand, this study extends current knowledge by looking at whether enforcement action by Bursa serves as educating mechanism to companies that have violated rules and regulation stipulated by authority. Using a constant sample of 55 companies that received public reprimand between 2007 and 2011, this study found that there are significant differences in board characteristics between companies that have been reprimanded by Bursa Malaysia and those which are not. Further to this, the test on board characteristics two years after public reprimand shows that there is no significant changes in board characteristics. This raise question as whether or not public reprimand serves as educating mechanism to companies listed on Bursa Malaysia.

Keywords: Public reprimand, board characteristics, audit committee, Bursa Malaysia

Updated:: 11/04/2022 [syazmer]