Bumiputera Institution and the Development of Corporate Governance in Malaysia

  • Nor Mohamad Yusof

Student thesis: Phd


Realizing the limitations of economic theories in explaining corporate governance practices, this thesis adopts an institutional approach in its attempt to understand how such issues are shaped by larger institutional contexts. Malaysia is used as a case study; and accordingly the influence of a dominant institution of Bumiputera (sons of the soil) on corporate governance practices is investigated. The thesis focuses on the emergence, institutionalization impact, and change of the Bumiputera institution; and how corporate governance practices are influenced in each stage. As a lens for analysis, this thesis integrates sociological and historical paradigms of the new institutionalisms, and extends Beckert's (2010) framework to include the role of power as advanced by Steven Lukes (1974, 2005). This extended framework is useful in explaining how the reciprocal influence of the Bumiputera institution, social networks, cognition, and power affect the behaviour of corporate governance actors. The analysis shows that, following the commitment by the state towards Bumiputera, the Malays' equity ownership has seen a progressive increase, although it failed to meet the specified target of 30%. Malays' representation on corporate boards also increased. The commitment has also led to a strong state presence in the economy, through its involvement in the Government Linked Companies, established to pursue Bumiputera's objectives. However, unintended consequences have arisen affecting both ownership and appointment. The analysis also shows that, while board appointment is largely based on social networks, the existence of the Bumiputera institution means that ethnicity matters. Appointment could be for political or legitimacy reasons. Heightened by liberalisation moves, both Bumiputera and corporate governance institutions are subject to change. However, this refers only to the regulative aspects of the institutions, which are more susceptible to change compared to their informal elements. The state's commitment towards Bumiputera remains. This study contributes to corporate governance literature by providing evidence on how corporate governance institutions are influenced by the larger social-political and institutional context vis-à-vis the emerging economy. This study shows that: firstly, corporate governance practices are shaped by history and political contexts; hence, understanding history would enhance the understanding of corporate governance. Secondly, ownership structure and the board of directors are not just mechanisms of corporate governance; rather, they are also channels through which larger objectives, including social objectives, are being pursued. Finally, this institution of corporate governance is not driven by functional needs of capital providers, but is shaped by powerful actors. Corporate governance practices are not intended just for resolving a particular agency problem, but are a mode of response to a particular historical incident that developed in postcolonial Malaysia.
Date of Award1 Aug 2013
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorDanture Wickramasinghe (Supervisor) & Mahbub Zaman (Supervisor)


  • Malaysia
  • Bumiputera
  • Board appointment
  • Corporate ownership
  • Sociological Institutionalism
  • Historical Institutionalism
  • Corporate governance

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