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Inside the family firms: The impact of family and institutional ownership on executive remuneration

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  • Ling Jong
  • Poh-Ling Ho

Abstract

This study empirically examines the impact of ownership structure on executive remuneration of listed family firms in Malaysia. Fixed effects model as the panel analysis of 279-listed family firms from 2010 to 2014 shows that institutional investors could not represent the minority shareholders’ interest in curbing the expropriation via executive remuneration by the controlling family shareholders. When the firm CEOs are non-family directors, both domestic and foreign institutional investors could exert a significant negative impact on executive remuneration. Thus, this study provides a theoretical contribution by affirming that the Type-II agency conflict between controlling shareholders and minority shareholders in family firms is ameliorated when the firm CEOs have no family relationship with the controlling shareholders. In addition, this study also unveils that domestic and foreign institutional investors have a different impact on the executive remuneration, where the governance role of the former prevails over the latter. The findings of this study would be useful for the policy-makers and regulators such as Securities Commission Malaysia and Minority Shareholder Watchdog Group to assess the expropriation issue and corporate governance in family firms.

Suggested Citation

  • Ling Jong & Poh-Ling Ho, 2018. "Inside the family firms: The impact of family and institutional ownership on executive remuneration," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1432095-143, January.
    • Handle: RePEc:taf:oaefxx:v:6:y:2018:i:1:p:1432095
    DOI: 10.1080/23322039.2018.1432095
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    2. Ahmad Firdhauz Zainul Abidin & Hafiza Aishah Hashim & Akmalia Mohamad Ariff & Waleed M. Al‐ahdal, 2024. "Ethical commitment, institutional investors and financial performance: Malaysian evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 1042-1056, January.
    3. Hafezali Iqbal Hussain & Azlan Ali & Hassanudin Mohd Thas Thaker & Mohsin Ali, 2019. "Firm Performance and Family Related Directors: Empirical Evidence from an Emerging Market," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 13(2), June.
    4. Waldkirch, Matthias, 2020. "Non-family CEOs in family firms: Spotting gaps and challenging assumptions for a future research agenda," Journal of Family Business Strategy, Elsevier, vol. 11(1).
    5. 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.
    6. Liew, Chee Yoong & Ko, Young Kyung & Song, Bee Lian & Murthy, Saraniah Thechina, 2019. "Directors’ remuneration, expropriation and firm performance in Malaysia: evidence from non-executive directors’ service duration within the remuneration committee," MPRA Paper 99703, University Library of Munich, Germany.

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