Title: Directors' remuneration, expropriation and firm performance in Malaysia: evidence from non-executive directors' service duration within the remuneration committee

Authors: Chee Yoong Liew; Young Kyung Ko; Bee Lian Song; Saraniah Thechina Murthy

Addresses: Faculty of Business and Information Science, UCSI University, 1, Jalan Puncak Menara Gading, Taman Connaught, 56000 Kuala Lumpur, Malaysia ' Sunway University Business School, Sunway University, 5, Jalan Universiti, Bandar Sunway, 47500 Petaling Jaya, Selangor, Malaysia ' Faculty of Business and Law, Taylor's University, No. 1, Jalan Taylors, 47500 Subang Jaya, Selangor, Malaysia ' INTI International College Subang, 3, Jalan SS15/8, 47500 Subang Jaya, Selangor, Malaysia

Abstract: In emerging markets, the issue of directors' remuneration being used as an expropriation channel by controlling shareholders is a significant problem to be investigated. In this study, using the fixed effect method, we examine the relationship between directors' remuneration and firm performance, and tests whether independent directors' tenure within the remuneration committee moderates this relationship in a sample of Malaysian publicly-listed firms. We find that the directors' remuneration is not significantly associated with firm performance and hence, not used as a channel of expropriation by controlling shareholders. Our results also show that longer tenure of the independent directors within the remuneration committee is negatively related with firm value. However, when directors' remuneration increase simultaneously with the tenure of the independent directors within the remuneration committee, firm value increased. This increment is stronger in family firms compared to non-family firms. These findings may provide policy implications with respect to how the Securities Commission (SC) could design and implement proper rules and regulations to govern the tenure of the independent directors within the remuneration committee in East Asian emerging market firms where agency problem type II is prevalent and ownership is highly concentrated.

Keywords: directors' remuneration; family firms; agency problems; Malaysia; corporate governance.

DOI: 10.1504/IJBG.2021.115300

International Journal of Business and Globalisation, 2021 Vol.28 No.1/2, pp.117 - 147

Received: 27 Nov 2018
Accepted: 03 May 2019
Published online: 27 May 2021 *

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