Directors’ Remuneration, Firm Performance and Political Connection: Evidence from State-Owned Enterprise (SOE) in Malaysia

Marziana Madah Marzuki, Roslina Salwani Haji Shukri

Abstract


ABSTRACT

The objective of this paper is to examine the relationship between directors’ remuneration and firm performance among state-owned enterprise (SOE) in Malaysia. In addition, we examine whether board size and government’s role moderate the relationship between directors’ remuneration and firm performance in SOE. Using panel data regression model on 118 firm-year observations of state-owned enterprise in Malaysia from 2011 to 2013, this study finds there is positive relationship between directors’ remuneration and firm performance. The result provides supports that directors’ remuneration acts as incentive to board of directors to perform their monitoring task. The result also indicates that larger board size and government play an important role in enhancing firm performance of state-owned enterprise in Malaysia. Nevertheless, when we interact both variables with directors’ remuneration, the result indicates that larger board size and political connected directors moderate the positive relationship between firm performance and directors’ remuneration. Our result provides evidence that the interaction between directors’ remuneration and board size as well as political connected directors explain firm performance among state owned enterprise in Malaysia.

Keywords: State-owned enterprise (SOE); directors’ remuneration; firm performance; political connection

ABSTRAK

Objektif makalah ini adalah untuk mengkaji hubungan antara ganjaran pengarah dan prestasi firma di kalangan syarikat milik kerajaan negeri (SOE) di Malaysia. Di samping itu, kami mengkaji sama ada saiz lembaga pengarah dan peranan kerajaan menyederhanakan hubungan antara ganjaran pengarah dan prestasi firma dalam SOE. Dengan menggunakan model regresi data panel ke atas 118 firma perusahaan milik kerajaan negeri di Malaysia dari tahun 2011 hingga 2013, kajian ini mendapati terdapat hubungan positif antara imbuhan pengarah dan prestasi firma. Dapatan analisa ini menyokong pernyataan bahawa ganjaran pengarah bertindak sebagai insentif kepada lembaga pengarah syarikat untuk melaksanakan tugas pemantauan mereka. Dapatan analisa juga menunjukkan bahawa saiz lembaga pengarah yang lebih besar dan hubungan dengan kerajaan memainkan peranan penting dalam meningkatkan prestasi firma milikan kerajaan negeri di Malaysia. Walau bagaimanapun, apabila diinteraksikan kedua-dua pemboleh ubah dengan imbuhan pengarah, hasilnya menunjukkan bahawa saiz lembaga yang lebih besar dan pengarah yang ada hubungan dengan politik menyederhanakan hubungan positif antara prestasi firma dan ganjaran pengarah. Dapatan analisa kami memberikan bukti bahawa interaksi antara ganjaran pengarah dan saiz lembaga pengarah serta pengarah yang ada hubungan politik merupakan faktor yang mempengaruhi prestasi firma milikan kerajaan negeri di Malaysia.

Kata kunci: Syarikat Milikan Kerajaan Negeri (SOE); ganjaran pengarah; prestasi firma; hubungan politik


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