CEO Power in Operating Performance Moderated by Board of Directors Effectiveness During the Tax Transition from GST to SST 2.0

• Main Authors: Mat Samsudin @ Mohd Sham, Mohd Amir, Chandren, Sitraselvi
• Format: Monograph
• Language: English
• Published: UUM 2022
• Subjects: HG Finance
• Online Access: https://repo.uum.edu.my/id/eprint/29565/1/14464.pdf; https://repo.uum.edu.my/id/eprint/29565/

Companies require a comprehensive plan and controls with the support of CEO and board of directors for an effective business operation that may influence the operating performance (profitability and liquidity position) during the Goods and Services Tax (GST) and Sales and Services Tax 2.0 (SST) periods. This study applied two-group sample t-tests to analyse the operating performance the profitability and liquidity position for 249 listed companies from manufacturing and service sectors during the GST and SST periods. As a result, the GST has a positive impact on company profitability, whereas the SST has a slightly greater effect to the company liquidity position. This study also used Ordinary Least Squares (OLS) regression to determine the CEO power (representing interlocking, age, tenure, ownership, education and type) relationship with operating performance (profitability and liquidity position) moderated by board effectiveness during GST and SST periods. It is empirically evidence with the support of agency theory and resource dependent theory assumptions that CEO power does have significant effect to operating performance during the GST and SST periods. Even though there was no significant relationship between CEO interlocking with operating performance, the younger CEOs had a good effect on operating performance (profitability and liquidity) for the GST period. During the GST and SST periods, CEO accounting education does not considerably contribute to improving operating performance. When compared to profitability performance during the SST period, CEO ownership has a beneficial effect on liquidity position during the GST period. The family CEO has a significant impact on the company's profitability during GST and SST periods when compared to the liquidity position. During indirect tax periods, board effectiveness strengthens the CEO interlocking and CEO tenure link with operating performance and impairs the CEO age association with operating performance. Interestingly, during the GST period, the CEO education relationship with operational performance weakens, whereas during the SST period strengthens the CEO education relationship with operating performance. For the both indirect tax periods, there is no interaction effect of board effectiveness on the relationship between CEO ownership and type relationship with operating performance. Additional analysis is conducted to further check the validity of the main results. This research is the first to investigate the impact of CEO power on operating performance with moderation effect of board effectiveness during the GST and SST indirect tax periods particularly in developing countries.