Corporate Governance and Carbon Emission Performance: Evidence in Malaysian
DOI:
https://doi.org/10.46754/umtjur.v7i1.495Keywords:
Corporate governance, carbon emission, agency theory, climate change, MalaysiaAbstract
This research delves into the intersection of corporate governance and carbon emission performance in Malaysia, shedding light on the pivotal role governance practices play in fostering environmental sustainability. The primary objective of this study is to investigate how key corporate governance mechanisms, namely CEO duality, Board size, and Board meetings, influence carbon emissions performance in the Malaysian context. This study employs panel data regression, and the results indicate a positive correlation between Carbon Dioxide (CO2) emissions and all other variables in the dataset. This implies that as CO2 emissions increase, there is a tendency for the other variables [board size, CEO-chairman duality, board meetings, and Return on Assets (ROA)] to also increase. In regression findings, CEO-duality does not significantly impact corporate governance, while a larger board size and more frequent board meetings positively influence effective corporate governance for decarbonisation. Surprisingly, lower ROA percentages are associated with better decarbonisation performance in firms. This suggests that, despite CEO-duality being less relevant, board-related factors and ROA play significant roles in the relationship between corporate governance and decarbonisation efforts. The study underscores the importance of viewing carbon emissions as a critical corporate outcome, encouraging companies to prioritise and improve their carbon emission performance. Particularly for firms facing less pressure from the takeover market, the study advocates for implementing policies to mitigate carbon emissions, recognising the growing global concern surrounding climate change. The government should enhance the regulatory framework by updating the Companies Act and ensuring stricter compliance with the Malaysian Code on Corporate Governance (MCCG). Strengthening corporate governance in Malaysia can enhance transparency and accountability in carbon emission reporting, encouraging companies to adopt sustainable practices.
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