The relevance of corporate governance practices for registered charity organizations in Malaysia

  • Authors

    • Saunah Zainon
    • Mazlina Abdul Majid
    • Soo Kum Yoke
    • Ahmad Marzuki Amiruddin Othman
    • Musmailina Mustafa Kamal
    https://doi.org/10.14419/ijet.v7i3.35.29301
  • Charity Organizations, Corporate Governance Practices, Performance, Program Efficiency.

  • Abstract

    The aim of this study is to examine whether registered charities in Malaysia have implemented principle-based corporate governance practices similar to those implemented by publicly-listed companies in Malaysia. This study investigates the relevance of corporate governance practices represented by the Malaysian Code of Corporate Governance (MCCG) 2017 on the financial performance of the registered charity organizations as measured by the program efficiency ratio. Panel data for the registered charities over the period 2014-2016 are analyzed using Ordinary Least Squares (OLS) regression. Program efficiency ratio is used as the dependent variable. The results confirm that board size, inclusion of outside directors and volunteers, as well as the presence of large donors in the board are positive and significant. Both organizational size and age are also important as performance determinants. Attention should be given when interpreting and generalizing the results due to the small sample size used, as compared to the whole population, which may have had a bearing on the results. This study offers insights for policy makers and regulators interested in adopting corporate governance practices for the charity organizations within Malaysia.

     

  • References

    1. [1] Abraham, A., 2007. Tsunami swamps ais agency accountability: Governance waives requirements. Australian Accounting Review, 17(1): 4–12.

      [2] ACEVO Consulting, 2011. Third sector governance. Retrieved from http://www.acevoconsulting.org.uk/articles/2011/10/12/third-sector-governance.

      [3] Andres-Alonso, P., Martin-Cruz, N., & Romero-Merino, M. E., 2006. The governance of nonprofit organizations: Empirical evidence from nongovernmental development organizations in Spain. Nonprofit and Voluntary Sector Quarterly, 35(4): 588-604.

      [4] Anheier, 2005. Nonprofit organisations: Theory, management, policy, Routledge, London.

      [5] Baskerville, R., 2006. What mischief does this legislation week to cure? Chartered Accountants Journal, 85(5): 38–39.

      [6] Beattie, V., McInnes, B., & Fearnley, S. 2004. A methodology for analysing and evaluating narratives in annual reports: A comprehensive descriptive profile and metrics for disclosure quality attributes. Accounting Forum, 28(3): 205-236.

      [7] Baysinger, R. D., & Hoskisson, R. E., 1990. The composition of boards of directors and strategic control. Academy of Management Review, 15: 72-87.

      [8] Callen, J. L., & Falk, H., 1993. Agency and efficiency in nonprofit organizations: The case of specific health focus, The Accounting Review, 68(1): 48-65.

      [9] Callen, J.L., Klein, A., & Tinkelman, D., 2003. Board composition, committees, and organizational efficiency: The case of nonprofits, Nonprofit and Voluntary Sector Quarterly, 32(4): 493-520.

      [10] Code of Governance for charities & institutions of a public character (IPCs), 2017. Charity Council Secretariat, Second refined edition: 1-84.www.charitycouncil.org.sg.

      [11] Coy, D., & Dixon, K. 2004. The public accountability index: Crafting a parametric disclosure index for annual reports. British Accounting Review, 36(1): 79-106.

      [12] De Andres, P., Azofra, V., & Lopez, F., 2005. Corporate boards in OECD countries: Size, composition, functioning and effectiveness, Corporate Governnace, 13(2): 197-210.

      [13] Edwards, M., & Hulme, D., 1996. Too close for comfort? The impact of official aid on nongovernmental organizations. World Development, 24(6): 961-973.

      [14] Guo, C., 2007. When government becomes the principal philanthropist: The effects of public funding on patterns of nonprofit governance. Public Administration Review, 67: 458-473.

      [15] MCCG. 2017. Malaysian Code on Corporate Governance Malaysia. Securities Commission Malaysia, Kuala Lumpur.

      [16] Newbury, S., 1992. Report on special issues of accounting for charities in New Zealand.

      [17] Newbury, S.. 1994. Charity accountability requirements, 73(7): 32.

      [18] Martyn, K., & Gousmett, M., 2011. Where is the accountability and transparency in a charitable trading trust? Retrieved from http://newzealandlawyer.co.nz/CurrentIssue/Issue139/139F8/tabid/2401/Default.aspx.

      [19] Newton, A. N. (2013). Managerial incentives, financial performance and governance quality: Evidence from nonprofit organizations, (1).

      [20] Reddy, K. Locke, S. & Fauzi, F., 2013. Relevance of corporate governance practices in charitable organizations: A case study of registered charities in New Zealand, International Journal of Managerial Finance, 9(2): 110-132.

      [21] Saunah, Z., Marshita, H., Nadzira, Y., & Ruhaya, A., 2013. Annual reports of non-profit organizations (NPOs): An analysis, Journal of Modern Accounting and Auditing, 9(2): 183–192.

      [22] Saunah, Z., Ruhaya, A., & Y. Bee Wah., 2014. An empirical study on the determinants of non-profit organizations’ information disclosure, Asian Review of Accounting, 22(1): 35-55. Scopus Indexed and ERA Indexed ISSN 1321-7348; 1758-8863.

      [23] Siciliano, J. I., 1996. The relationship of board member diversity to organizational performance, Journal of Business Ethics: 15(12), 1313-1320.

      [24] Singh, H., & Harianto, F., 1989. Management board relations, takeover risk, and the adoption of golden parachutes, Academy of Management Journal, 32(1); 7-24.

      [25] Stone, M. M., & Ostrower, F., 2007, Acting in the Public Interest? Another look at research on nonprofit governance, Nonprofit and Voluntary Sector Quarterly, 36(3): 416–438.

      [26] Trussel, J.M., & Parsons, L.M., 2004. Financial reporting factors affecting donations to charitable nonprofit organizations, available at: http://ssrn.com/abstract=481383.

      [27] Tooley, S., & Guthrie, J. 2001. Performance accountability disclosures in annual reports: An application in the New Zealand compulsory school sector. Paper presented at the Third Asian Pacific Interdisciplinary Research in Accounting Conference, Adelaide.

  • Downloads

  • How to Cite

    Zainon, S., Abdul Majid, M., Kum Yoke, S., Marzuki Amiruddin Othman, A., & Mustafa Kamal, M. (2018). The relevance of corporate governance practices for registered charity organizations in Malaysia. International Journal of Engineering & Technology, 7(3.35), 217-220. https://doi.org/10.14419/ijet.v7i3.35.29301

    Received date: 2019-05-16

    Accepted date: 2019-05-16