Chee , Hong Kok
(2010)
The Relationship Between Capital Structure
And Concentrated Ownership
(Agency-Related Problems).
PhD thesis, Universiti Sains Malaysia.
Abstract
Malaysia is known for its highly concentrated ownership structure. The
highly concentrated ownership structure brings an advantage of having less
asymmetric information but at the same time is said to be prone to agencyrelated
problems such as risk shifting, empire building and shirking.
Therefore, the study is undertaken to ascertain if the level of debt (capital
structure level) of Malaysian companies are heavily influenced by the agencyrelated
problems or create an efficient monitoring mechanism. Through
previous studies from countries with similar ownership structure such as
Indonesia (Taridi, 1999) and Thailand (Wiwattanakantang, 1999) show no
monitoring mechanism and having monitoring mechanism respectively,
Malaysia warrants a special investigation as her investor protection law is
better than those of the two mentioned countries (La Porta, Lopez-de-Silanes,
Shleifer and Vishny, 1998).
This study addresses the relationship between capital structure and
concentrated ownership (agency-related problems). Using panel data analysis
methodolgy, 179 Malaysian listed Main Board firms covering a period of 11
years from 1993 to 2003 were examined. Managerial ownership did not have
a significant relationship with debt ratio implying that debt is not used as a
monitoring device and at the same time debt was not used to maintain control
over their firm. Evidence from this study suggests that managerial ownership
resulted in higher profitability and this rejects the presence of Type II agency
problems (conflicts between owner-manager and minority shareholders). High
ownership concentration was found to be an effective control device. The
same goes for foreign ownership. There was no evidence of moral hazard
problems in the form of asset tangibility in this study. This study did not find
the presence of Type II agency conflicts via measures like profitabilty. Also,
there was no evidence of wealth transfer (a form of Type II agency problems)
through dividends.
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