This chapter is consists the information related to a study of the relationship between corporate governance and financial institution’s performance in Malaysia.
1.1 Background of Study
When Asian Financial Crisis happened in 1997, the term of corporate governance is introduced, public start to concerns on the weaknesses of Malaysia corporate governance practice (Azira Hanani & Siti, 2007). ‘Corporate Governance’ is the system of rules, practices and processes which directed and controlled by a company. Corporate governance essentially involves balancing the interests of the many stakeholders in a company. These include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure. (Governance, 2013)
Corporate Governance is a set of mechanisms which will influence managers making decisions when there is a separation of ownership and control (F.Larcker, Scott, & Iren, 2005). Corporate Governance has become a central issue of policy debate for more than 3 decades now. The mechanism of corporate governance and the type of information about corporate decision on the one hand and on the other hand, the performances of the firm and the information that the corporation should make public, constitutes major issues of discussion in the corporate governance debate (Kolawole Olugbenga Oladele, 2006). If better corporate governance is related to better firm performance, better governed firms should perform better than worse-governed firms.
Most companies strive to have a high level of corporate governance. These days, it is not enough for a company to merely be profitable; it also needs to demonstrate good corporate citizenship through environmental awareness, ethical