Lim, Boon Leong
(2013)
Expropriation Of Minority
Shareholders: A Study Of Familyowned
Firms In Malaysia.
PhD thesis, Universiti Sains Malaysia.
Abstract
Based on a balance panel data of 191 family-owned public companies listed on the
Main Board of Bursa Malaysia between 2002 and 2007, this study examines whether
minority shareholders have been expropriated by executive directors via the setting
of directors’ remuneration. It also seeks to determine which component of directors’
remuneration has been used as the means of expropriation; and at which managerial
ownership levels has expropriation taken place. Examination of these research
problems is based on the premise of managerial power theory which predicts the
occurrence of expropriation given the characteristics of family-owned firms in
Malaysia. Among those characteristics that provide the incentives for expropriation
include divergence of cash flow and control rights, involvement of controlling
shareholders in the firm management, and the presence of family members in the
board of directors. The regression analysis shows that salary has been used as the
means of expropriation between managerial ownership levels 23 – 76%. The
occurrence of expropriation at this medium ownership level is due to the managerial
entrenchment effect postulated by managerial power theory. Nevertheless at
managerial ownership levels below 23% (low level) and above 76% (high level), the
alignment of interest effect associated with managerial ownership brings about a
lower level of salary paid to executive directors. Hence there is a non-linear
relationship between directors’ salary and managerial ownership by using the fixed
effect regression model.
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