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Directors’ compensation, ownership concentration and the value of the firm: evidence from an emerging market

Author

Listed:
  • Chee Yoong Liew

    (UCSI University)

  • YoungKyung Ko

    (Sunway University)

  • Bee Lian Song

    (Taylor’s University)

  • Saraniah Thechina Murthy

    (Inti International College Subang)

Abstract

We examine the association between directors’ compensation and firm value and investigate whether ownership concentration moderates this relationship by utilising a sample of Malaysian public-listed firms for the period from 2004 to 2014. Using fixed effect regression, we find that the remuneration of executive and non-executive directors is positively related to firm value. However, there is no conclusive evidence on the moderating effect of ownership concentration on the relationship between executive directors’ and non-executive directors’ compensation and firm value. Our findings indicate that executive and non-executive directors’ compensation packages should be linked to firm performance. The implication of this research addresses one of the key issues in corporate finance i.e., whether it is worth compensating directors in emerging markets or not.

Suggested Citation

  • Chee Yoong Liew & YoungKyung Ko & Bee Lian Song & Saraniah Thechina Murthy, 2022. "Directors’ compensation, ownership concentration and the value of the firm: evidence from an emerging market," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(1), pages 155-188, March.
    • Handle: RePEc:spr:epolin:v:49:y:2022:i:1:d:10.1007_s40812-022-00210-8
    DOI: 10.1007/s40812-022-00210-8
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    More about this item

    Keywords

    Directors’ compensation; Ownership concentration; Agency problem; Emerging markets; Firm value;
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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