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

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...

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Bibliographic Details
Published inEconomia e politica industriale Vol. 49; no. 1; pp. 155 - 188
Main Authors Liew, Chee Yoong, Ko, YoungKyung, Song, Bee Lian, Murthy, Saraniah Thechina
Format Journal Article
LanguageEnglish
Published Cham Springer International Publishing 01.03.2022
Springer Nature B.V
Subjects
Business Strategy/Leadership
Directors
Economics
Economics and Finance
Entrepreneurship
Industrial economics
Industrial Organization
R & D/Technology Policy
Agency problem
Ownership concentration
Firm value
G300
Directors’ compensation
Emerging markets
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Summary: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.
ISSN:0391-2078
1972-4977
DOI:10.1007/s40812-022-00210-8