Corporate Governance and Bond Ratings in Malaysia

Yau, Josephine Tan Hwang and Audrey, Liwan and Kueh, Jerome Swee Hui and Nur Zaimah, Ubaidillah and Rosita, Hamdan and Yessica, . (2020) Corporate Governance and Bond Ratings in Malaysia. International Journal of Academic Research in Accounting, Finance and Management Sciences, 10 (2). pp. 295-303. ISSN 2225-8329

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Abstract

This paper examines the effects of corporate governance mechanisms on bond ratings of banking firmsin Malaysia. This study scrutinises the link between institutional ownership, and independent directorship with bond ratings of Malaysian local banks, while holding the debt to equity and size of the firm as control variables. Our sample consists of Malaysian local banks from 2005 to 2017. This study employed the panel ordered logistic regression and found that independent directors and blockholders show an insignificant relationship with bond ratings. Leveraging debt to equity ratio also showed an insignificant relationship with bond ratings. However, a significant positive relationship has been found between firm size and bond ratings. Our insignificant result for corporate governance mechanism and bond ratings may be due to banking firms work closely with rating agencies as they are also part of the key underwriters of debt securities issuing and Sukuk for other cooperations; hence their bond ratings may be less influencedby their independent directors and blockholders. The study from this paper can be used as a guideline for bank management, current and potential investors, and policymakers in Malaysia by providing additional evidence of bond ratings in the Malaysian market

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