Family Business, Board Dynamics and Firm Value: Evidence from Malaysia

Most research concentrating on family and non‐family businesses with firm performance is conducted overseas with little research actually taking place in Malaysia. Thus, this study focuses on the relationship between family controlled businesses and corporate governance mechanisms with firm value among Malaysian companies. The sample size of this study is 896 companies that were listed on Bursa Malaysia from 2000 to 2003. The findings reveal that corporate governance mechanisms do have an influence on firm value in Malaysia. However, not all elements of governance mechanisms are significant, and the effects differ between family‐businesses and non‐family businesses. The results indicate as expected that board size and leadership structure affect the firm value for all companies. Further analysis shows that family businesses do practice separate leadership structure whilst board size contributes positively towards better performance in non‐family companies. More importantly, family and non‐family businesses are different in terms of corporate governance practices. Thus, regulators need to give additional attention to the unique setting of the family companies.