The Resource Provision Capability of Independent Directors in Family-Controlled, Publicly-Listed Companies in Malaysia

Abstract

To develop a comprehensive measurement index that captures a wide range of independent director characteristics that collectively reflect their overall resource provision capability in the context of Malaysian publicly-listed companies. A detailed content analysis of independent director-related disclosures in the annual reports of 217 family-controlled companies listed on the Malaysian stock exchange (Bursa Malaysia). Ten distinctive types of ‘resource’ that independent directors bring to their respective companies were identified. These resources (e.g. government contracts, networks, loans, expertise, etc.) are then utilized to develop a resource provision capability index. The resultant index provides a fair indication of independent directors’ contribution to enhancing/sustaining their respective companies’ performance. The developed comprehensive resource provision capability index can be used to explore as well identify the specific nature of independent director contribution to their respective firms. This study makes a contribution to the governance literature by elaborating on independent directors’ resource provision role that has been generally ignored in “Western” studies. More specifically, not only we are proposing that independent directors’ role transcends the classic, Western-inspired monitoring role, we provide evidence of other specific means by which they can contribute to their respective firms and offer a framework to capture all such capability in a concurrent manner.