Model for Leveraging Growth Strategy and Corporate Governance

     MODEL FOR LEVERAGING GROWTH STRATEGY AND CORPORATE GOVERNANCE FIT FOR A SUPERIOR FINANCIAL PERFORMANCE IN THE MALAYSIA PROPERTY INDUSTRY

Assoc. Prof. Dr Kartinah Binti Ayupp, UNIMAS

Associate Professor Dr. Kartinah Ayupp

Dr. Daw Tin Hla

Encik Mohd Waliuddin Mohd Razali

Faculty of Economics and Business

University Of Malaysia Sarawak

ABSTRACT

This study was undertaken to examine the types of growth strategies and corporate governance activities adopted by the property and construction firms listed in the Bursa Malaysia, by using firm’s size and listing age as control variables. Currently there is a lack of studies on how growth strategy and corporate governance activities can be leveraged as a means to achieve superior financial performance. In terms of the scope of the study, this study covers all the construction and property firms listed under the Bursa Malaysia that have full set of data dated from 2000 to 2105.With this in mind, the total number of firms under study are 38 firms from the construction sector, and 76 firms from the property sector. Based on the result of this study, it is generally found that the construction public-listed firms adopted more types and breadth of growth strategies compared to the property firms. Big sized and well-established construction firms are able to set a premium price for their products while maintaining a low-cost structure in comparison to their smaller-sized competitors. Construction sector’s firms focuses more on market penetration, risk management, customer relationship networking and R&D investment on technology such as IBS and green technology in their business processes. On the part of the property sector’s firms, the main growth strategies adopted involve offering customized product/services especially within urban clienteles, mixed use of the buildings, focusing business in a specific geographic location – such as highly populated and developed locations, new township or future planned government infrastructure locales. Just like construction sector, firms in the property sector also adopted related diversification. In terms of corporate governance, construction sector was seen to have less influential effects as compared to the property sectors, while listing age do not have significant influence to the firms in both sectors. Both sectors have numerous important upstream and downstream stakeholders, including private and public agencies; with customers encompassing both B2B and B2C such as commercial and residential clients, designer, contractors, and manufacturers etc. With such fragmented sectors, this can create issues such as lack of coordination and mismatched if not managed properly. In terms of corporate governance aspects, it is found that BoD’s elements such as board diversity, size and composition, do not significantly influence the level of financial performance of the construction firms. While for the property sector, board diversity, composition, role of audit committee and board independency have positive relationship with property firms’ performance.

Keyword: Growth Strategy, Corporate Governance, Firm Performance, Malaysian Property Industry