• Peck-Ling Tee University Tunku Abdul Rahman
  • Nai-Chiek AIK University Tunku Abdul Rahman
  • Yeen-Lai Khong University Tunku Abdul Rahman
Keywords: Boardroom tussle, Cumulative abnormal return, Agency theory, Reputation damage, Efficient market hypothesis


Due to differences in opinions and goals, disagreement within the board of directors is common in corporate world. Conflicts in the boardrooms can occur not just between groups of shareholders trying to acquire controlling interest in a company, but also between executive and non-executive directors who represent different stakeholders. Reputation damaging effects model predicts that boardroom tussle events have negative influence on stock returns, whilst the concentration of ownership and control that followed after the tussles can reduce agency problem and positively influence stock returns. This research includes all the 30 events of boardroom tussles involving 10 public listed companies over the period from year 2014 to year 2017 that are announced in Bursa Malaysia website as the sample. This research applies paired-sample compare means ttest method with hypothesized mean difference value of zero to determine whether cumulative abnormal return (CAR) is significant over various event windows for boardroom tussles. Results show that CAR is generally positive before the announcement, but become negative thereafter. In addition, CAR of affected companies is significantly negative over the period of five trading days after the event, indicating that the Malaysian stock market might not be semi-strong form efficient. Stock traders can utilise public information on boardroom tussle to sell the shares of affected company and purchase back five trading days later to earn an abnormal profit.


Download data is not yet available.


Brown, S., & Jerold, W. (1985). Using daily stock returns: the case of event studies. Journal of Financial Economics,
14, 3-31.

Claessens, S., Djankov, S., & Lang, L. H. P. (2000). The separation of ownership and control in East Asian
corporations, Journal of Financial Economics, 58, 81–112.

Desai, H., Hogan, C. E., & Wilkins, M. S. (2006). The reputational penalty for aggressive accounting: Earnings
restatements and management turnover. Accounting Review. http://doi.org/10.2308/accr.2006.81.1.83

Dewally, M., & Peck, S. W. (2010). Upheaval in the boardroom: Outside director public resignations,
motivations, and consequences. Journal of Corporate Finance, 16(1), 38– 52.

Fama, E. F. & Jensen, M. C. (1983). Agency problems and residual claims. Journal of Law and Economics, 26(2),

Fiordelisi, F., Soana, M.G., & Schwizer, P. (2013). The determinants of reputational risk in the banking sector.
Journal of Banking & Finance, 37(5), 1359-1371.

Gatzert, N. (2015). The impact of corporate reputation and reputation damaging events on financial
performance: Empirical evidence from the literature. European Management Journal, 33(6), 485–499.

Hsiang-Tsui, C. (2005). An empirical study of corporate governance and corporate performance. The Journal of
American Academy of Business Cambridge, 95-101.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the business: Managerial behavior, agency costs and
ownership structure. Journal of Financial Economics, 13, 305-360.

Liu, C., Aharony, J., Richardson, G., & Yawson, A. (2016). Corporate litigation and changes in CEO reputation:
Guidance from U.S. Federal Court lawsuits. Journal of Contemporary Accounting and Economics, 12(1), 15–34.

Mishra, C. S., Randoy, T., & Jensen, J. I. (2001). The effect of family influence on firm value and corporate
governance. Journal of International Financial Management and Accounting, 12(3), 235-259.

Mitchell, M., & Netter, J. (1997). Finance event studies are used to assess damages. Journal of Economic Literature,13–39.

Perry, J. & de Fontnouvelle, P. (2005). Measuring reputational risk: The market reaction to operational loss
announcements. Working Paper. Boston, MA: Federal Reserve Bank of Boston.

Rahman, A. R., & Ali, M. F. H. (2006). Board, audit committee, culture and earning management: Malaysian
evidence. Managerial Auditing Journal, 21(7), 783-804.

Tang, X., Lin, Y., Peng, Q., Du, J., & Chan, K. C. (2016). Politically connected directors and firm value: Evidence
from forced resignations in China. The North American Journal of Economics and Finance, 37, 148–167.

Williams, A., & Siegel, D. (1997). Event studies in management research: Theoretical and empirical issues.
Academy of Management Journal, 40(3).
How to Cite
Tee, P.-L., AIK, N.-C., & Khong, Y.-L. (2018). EFFECTS OF BOARDROOM TUSSLE ON STOCK RETURN OF MALAYSIAN LISTED COMPANIES. Journal of Contemporary Issues and Thought, 8, 65-72. https://doi.org/10.37134/jcit.vol8.7.2018