Malaysian Journal of Economic Studies

Nexus between ESG Practice and Firm Performance: Are there any Stylised Facts?

Tien-Ming Yip — 2024-09-12

This study examines the relationship between firm performance and ESG (environmental, social and governance) practice for Malaysian public-listed companies. It evaluates whether the relationship varies with firms’ market capitalisation, total liabilities, and free cash flow. Using firm-level data from 72 companies covered in the FTSE4Good Bursa Malaysia (F4GBM) index from 2014 to 2022, our results show the following. First, ESG practice is positively and significantly associated with firm performance. However, the positive impact is conditional on the firm-specific variables. In particular, the positive impact of ESG is significant for firms with high market capitalisation. Second, the positive impact of ESG diminishes as firms accumulate higher liabilities. Third, the positive impact of ESG prevails if firms attain a high level of free cash flow. Our results suggest that firms must increase their market capitalisation, reduce total liabilities, and improve their free cash flow to benefit from ESG practices.

Does Environmental Factor Influence the Rating of Creditworthiness? A Comparative Analysis of Developed versus Developing Countries

Kok-Tiong Lim — 2024-09-12

This paper examines the influence of environmental factor in the determination of a country’s creditworthiness given the world’s agenda to contain the rise in global temperature. This paper leverages on two environmental factor proxies, CO2 emissions per capita and renewable energy per capita, to assess whether the environmental factor plays a significant role in determining the sovereign credit ratings (SCRs) issued by three leading credit rating agencies (CRAs), i.e., Moody’s, S&P and Fitch for 49 countries spanning the period of 2000 to 2021. The empirical results show that the environmental factor is being considered by the CRAs. Since the signing of the Paris Agreement in 2015, the environmental factor has turned significant for the determination of the SCRs of developing countries, but not for the developed countries. The creditworthiness of developing countries is subjected to a penalty for CO2 emissions. While the level of renewable energy adoption is higher amongst the developed countries, the evidence does not show that their level of CO2 emissions is lower. This paper recommends the CRAs to explicitly state the environmental factor criteria and update their SCR methodologies to ensure uniformity in application.

The Role of Green Taxation Governance in China: A Review of the Development and Impacts of Environmental Protection Tax

Chen Zhang — 2024-09-12

The initiatives from China’s “ecological civilisation construction” to “promoting the modernisation of harmonious coexistence between man and nature”, and then to the dual-carbon goal of “carbon peaking – carbon neutrality”, highlight China’s firm determination to promote green development further. On January 1, 2018, the Environmental Protection Tax Law of the People’s Republic of China was officially implemented as the first new green tax focused on environmental governance in China. This marks the formal entry of China’s environmental protection into the tax era and the establishment of a green tax system with environmental protection tax (EPT) as the core. By a comprehensive review of the development, multi-dimensional effects and tax optimisation paths of China’s EPT, this paper hopes to provide an important reference for government departments to improve the construction of the green tax system, for enterprises to enhance their green governance capabilities, and for scholars to extend the study of the green tax system.

Malay Entry into Business through Scaling the Heights of Corporate Malaysia from mid-1980s – An Assessment

R. Thillainathan — 2024-09-12

The aim of this paper is in identifying and analysing, from an economic perspective, the policies, programs and instruments the government used in promoting Malay entry into business, the form of this entry, including of rent-seeking, the extent to which Malays have scaled the heights of Corporate Malaysia as well as of the factors accounting for the success or failure of this agenda in the post-1985 period after the launch of the corporatisation and privatisation era. The discussion on the performance as well as of the key problems and issues encountered from the country’s use of the corporatisation or privatisation route to promote entry, is also combined with a similar discussion on its use of: (a) government linked investment companies (GLICs) in promoting Malay entry into business from an almost non-existent level in 1957, (b) the private finance initiative (PFI) or the build, lease, maintain and transfer (BLMT) model in promoting entry as an owner-manager in the era of corporatisation and institutional fund management, as well as (c) multiple instruments in aggressively promoting entry within an industry or sector with multiple goals.

Political Leadership Matters: The Case of Four Successful East Asian Economies

Kiong-hock Lee — 2024-09-12

Out of the thirteen economies that registered sustained rapid economic growth in the post-war period, only six successfully transitioned into high-income economies. Malaysia did not make the cut. The Commission on Growth and Development (CGD) identified credible leadership as a key factor behind the success of the six economies, but it had very little to say about the individual political leaders. This paper fills the gap by allowing the political leaders and their adroitness to speak for them. In particular, we focus on the mindset, acumen and demeanour of the key political leaders in building social capabilities that are crucial to rapid economic growth and development. We find that key political leaders like Okubo Toshimichi of Japan, Park Chung Hee of South Korea, Chiang Kai Shek of Taiwan and Lee Kuan Yew of Singapore rose to the external, existential threats to their peoples and paved the way for them to catch up with the developed economies by displaying and practising the mindset and behaviours of the class of transformational leadership.

Political Leadership Matters: Malaysia’s Unrealised Potential

Shyamala Nagaraj — 2024-09-12

Malaysia was among five East Asian nations that successfully leveraged globalisation to achieve sustained high economic growth in the post-war period. But it has been unable to transition beyond upper-middle income to high-income status, unlike the other economies of Japan, South Korea, Taiwan and Singapore. In this paper, we appraise Malaysia’s political leadership to understand the reasons for its restrained growth. Specifically, we assess the demeanour and acumen of Malaysia’s prime ministers in economic decision-making. We find that the early leaders were more transformational and set Malaysia on the path to income growth. However, political leaders since the 1980s have been more transactional, using race and religious divides to entrench political power, cronyism and corruption resulting in a concomitant erosion in social capabilities. The result is serious deficits in the quality of human capital, critical-thinking capabilities of the civil service, and the integrity and independence of the institutions of economic governance. These constrain the ability to face external challenges of a changing world order impacting both Malaysia’s global trade relations and its society. Only a transformational leader can galvanise Malaysians to overcome these challenges and direct much-needed reforms to help Malaysia transition to high-income status.

Human Capital, Amenities and Trade: The Case of Malaysia

Cassey Lee — 2024-09-12

Human capital plays an increasingly important role in economies undergoing structural transformation that involves technological upgrading and sustained trade competitiveness. Both production and consumption amenities are essential to develop, attract and support a workforce with high human capital. Different types of production and consumption amenities are relevant for different kinds of activities at various locations. As human capital growth is likely to be accompanied by worsening inequality, complementary policies are needed to promote inclusiveness without dampening human capital development.

Job Polarisation: The Change of Nature of Task and Skill Needs

Chen Chen Yong — 2024-09-12

Job polarisation is the growth of high- and low-skilled employment relative to middle-skilled employment, typically in developed countries. Based on Khazanah Research Institute’s (KRI) descriptive study in 2017, Malaysia’s workforce experienced job polarisation over the last two decades. This study uses a different approach, i.e. multinomial logistic regression, to measure the probability of employment choice by different job categories to validate the presence of job polarisation in Malaysia. Unlike past research that used headcounts based on wage quantiles, this paper considers the individual and sectoral effects. This study confirms the job polarisation finding of KRI (2017) by comparing Malaysia’s employment structure between 2011 and 2017. Technology changes the methods and skills required to perform the same tasks. Besides, the adoption of technology depends on the firm’s or industry’s foresight of how technology may change the productivity of the worker. If the investment cost of a technology is greater than the training cost, firms may not adopt the technology. If an industry has the foresight of how technology may change the performance of tasks, and recruit workers in tandem with upskilling programmes, the phenomenon of job polarisation will fade out eventually.

Gender Disparities in Digital Employment in China

Huixin Mi — 2024-09-12

The rapid expansion of the digital economy has profoundly reshaped employ-ment dynamics in China. Drawing on microdata from the China General Social Surveys (CGSS) conducted in 2010 and 2021, this study delves into the evolving gender gap within China’s digital workforce. Through bivariate analyses and logistic regression, this research examines how gender intersects with various factors, including age, educational attainment, account status, number of children, internet usage, and geo-graphical region, to elucidate disparities in digital employment. Findings indicate a shift towards greater gender parity in the digital sector, notwithstanding enduring challenges for women. The responsibilities of childbearing and childrearing have constrained women’s engagement in digital occupations, although this impediment is diminishing. Educational achievements and internet usage emerge as pivotal determinants of digital employment for both genders. Workers in the more developed Eastern region exhibited higher likelihoods of digital employment than those in other regions. Diverse strategies are essential to tackle gender gaps in digital employment.

Medium of Instruction in Education and Language Use: The Case of the Hakka in East Malaysia

Seong Lin Ding — 2024-09-12

In the context of education in Malaysia, the challenges faced by the ethnic Chinese population consist of having to learn Malay and understanding the need to acquire fluency in English for economic mobility. Should they opt for vernacular education, they have also to deal with Mandarin, which is not their native/heritage language. Adopting a quantitative method, this study examines how Hakka communities in East Malaysia navigate the challenges and the consequences of their decisions on language use. Three specific questions are addressed: (a) What is the impact of medium of instruction in education on the language used by students at home and socially? (b) Has this impact changed across generations? (c) How has language use in school impacted identities? The findings show that Hakka language is used less in everyday conversations over time. The need to preserve Hakka language to retain their ethnic identity is perceived to be less important, more so among the younger generations. The issue is most evident among individuals who attended Mandarin speaking schools, particularly the Chinese independent schools. The findings suggest an association between the education language and the shift in both usage and knowledge of the heritage language toward the education language.