Authors: Ahmad Ibn Ibrahimy; Rubi Ahmad
Addresses: School of Maritime Business and Management, Universiti Malaysia Terengganu, 21030 Kuala Terengganu, Malaysia ' Faculty of Business and Accountancy, University of Malaya, 50603 Kuala Lumpur, Malaysia
Abstract: Ownership structure is an imperative factor in determining firm objectives, increasing the shareholders' wealth and disciplining the executives. Our study looks into the effectiveness of yearly executive stock option (ESO) granting as a corporate governance mechanism designed to reduce agency problems, thereby increasing firm value. Using fixed effect panel data analysis, we found a significant positive relationship between ESO granting and firm value in the presence of concentrated ownership in Malaysia. This relationship is significant for the years next to the years of ESO granting occurrences while considering both market and accounting-based performance measurements. Additionally, based on firm-size, we also found a significant difference of ESO granting of Malaysian non-financial firms.
Keywords: agency problems; corporate governance; descriptive statistics; ESO granting; firm size; firm value; fixed effect; Malaysia; ownership structure; panel data analysis; return on assets; ROA; Tobin's q; executive stock options; executive remuneration.
International Journal of Business Excellence, 2016 Vol.10 No.4, pp.433 - 448
Received: 24 Nov 2014
Accepted: 15 Feb 2015
Published online: 15 Sep 2016 *