Corporate Governance Mechanisms and Bank Performance: Resource-based View

The high profile accounting scandals, for example, WorldCom and Enron, have intensely impacted the nation and world economies. These events had ignited the importance of implementing good corporate governance mechanisms for companies, including the banking sector in Malaysia. Using the resource based theory, this paper examined the corporate governance mechanisms specifically the ownership monitoring mechanism, internal control monitoring mechanism (board independence and board size), and regulatory mechanism (capital adequacy ratio) influence on the bank performance. The sample of 18 banks (from 2009 to 2013) was collected from Thompson Reuters Worldscope database. The regression analysis has been employed to accomplish the objective of this paper. Based on the results, regulatory monitoring mechanism was found to be a significant influence on bank performance. Findings from this paper would assist the Central Bank of Malaysia and the Securities Commission to formulate strategies for the banking sector to fully comply with the Malaysian Code of Corporate Governance 2012. In addition, banks in Malaysia would be able to identify resources that need to be prioritized in attaining higher performance.