The effect of insiders and business experts on firm performance

Abstract

This study was conducted to examine the effect of different categories of directors on firm performance. The aim was to determine whether the proportion of insiders and business experts on boards is significantly associated with firm performance. The samples used included the annual reports of 200 manufacturing firms over nine consecutive years, from 2008 to 2016, resulting in a total of 1,818 firm-year samples. The annual reports were collected from Bursa Malaysia, and additional data were gathered from DataStream. All data were analyzed using descriptive analysis, correlation analysis, and regression analysis in SPSS. These analytical techniques were employed to evaluate the relationships between the research variables. The results indicate that the proportion of insiders on the board of directors has a significant negative association with firm performance. Conversely, the proportion of business experts on the board does not have a significant impact on firm performance. Therefore, shareholders should consider appointing fewer insiders to the board and placing less emphasis on the proportion of business experts. Such adjustments could lead to improved firm performance and sustainable growth.