The Impact of Code of Ethics on Public Investors' Confidence Level in Malaysian Companies: The Mediating Effect of Ethical Climate and Corporate Social Responsibility (CSR)

Kok, Zheng Xian (2022) The Impact of Code of Ethics on Public Investors' Confidence Level in Malaysian Companies: The Mediating Effect of Ethical Climate and Corporate Social Responsibility (CSR). Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

Due to the rise in corporate scandals and fraud cases worldwide, investor confidence has been shaken and people began to realise the need and significance of efficient corporate governance. The Sarbanes Oxley Act of 2002 was passed by the United States Congress aiming to restore investors’ confidence towards the capital market through the adoption of code of ethics. It was highlighted that the value of corporate code of ethics could help to establish a strong internal control environment to avoid or discourage management fraud. However, high-profile corporate scandals are still happening throughout the world since its debut in 2002, while ethical dilemmas and individual variables, beliefs, attitudes and behaviours may be to blame for these scandals and poor corporate governance. As a result, investors today are more concerned than ever before about issues of ethical corporate governance such as code of ethics, ethical climate within organisations, corporate social responsibility and corporate reputation. With that, a quantitative research study is conducted through the collection of primary data via online survey questionnaires from 370 Malaysian public investors to satisfy the research questions and objectives. The findings exhibited that code of ethics would promote public investors’ confidence level through the mediating effect of corporate social responsibility and corporate reputation. In addition, the results shown that there is no positive relationship between ethical climate and investors’ confidence level. This study provides insight on how code of ethics could improve the investors’ confidence level in an Eastern culture, particularly for a country like Malaysia that has received less attention. Practically, it delivers the awareness for Malaysian companies to adopt code of ethics and serves as guideline for future policy development. Keywords: Investor Confidence; Code of Ethics; Ethical Climate; Corporate Social Responsibility; Corporate Reputation; Corporate Governance.