The Effects of Concentrated Ownership on The Performance of the Firm: Do External Shareholdings and Board Structure Matter?

Fauzias Mat Nor, Faizah Mohd Shariff, Izani Ibrahim

Abstract


ABSTRACT
The Malaysian corporate governance varies according to the ownership structure of the corporate sector. At one end of the spectrum there are companies in which ownership is dispersed among small shareholders, while control is concentrated in the hands of the large shareholders. This study analyses the role played by concentrated ownerships through the top ten shareholders of the non-financial firms that are listed on the KLSE in determining their performances. A total of 2608 companies are used in this study and various measures of performance and categories of ownerships are used to study the different effect of different ownerships on performance. Ownership roles are observed from two perspectives namely their ownership concentration and the components of this ownership concentration as proxy for corporate governance mechanisms. The finding from this empirical study provides information on the importance of large institutional shareholders in corporate governance. This study also providing evidence that, typically equity owned by the corporations, government, nominees and individuals are directly influencing the financial structures of the firms. This will eventually affect the overall performance of the firms. This indicates that to encourage firm performance, it very much dependent upon the supply of suitable management and directors as well as other stakeholder’s information.

ABSTRAK
Tadbir urus korporat di Malaysia berbeza mengikut struktur milik sektor korporat. Pada penghujung perbezaan ini, terdapat syarikat dengan struktur miliknya dianggotai oleh ramai individu sebagai pemilik kecil saham tetapi dikuasai oleh hanya sebilangan kecil pemilik besar saham. Kajian ini mengkaji peranan yang dimainkan oleh sepuluh pemilik terbesar bagi syarikat bukan kewangan yang disenaraikan di Bursa Malaysia mengikut prestasi. Jumlah syarikat yang dikaji adalah 2603 dan pelbagai pengukur prestasi dan kategori pemilikan digunakan bagi mengkaji pelbagai kesan pemilikan terhadap prestasi syarikat. Peranan pemilikan dikaji daripada dua perspektif, iaitu pemusatan pemilikan dan komponen pemusatan pemilikan sebagai proksi kepada mekanisma tadbir urus korporat. Penemuan dari kajian empirikal ini memberi maklumat mengenai kepentingan pemilikan besar dari institusi dalam tadbir urus syarikat. Kajian ini juga membuktikan bahawa ekuiti yang dimiliki oleh syarikat, kerajaan dan individu mempengaruhi secara langsung struktur syarikat. Ini pada akhirnya akan mempengaruhi keseluruhan prestasi syarikat. Ini menunjukkan bahawa bagi menggalakkan prestasi syarikat, ianya bergantung kepada kewujudan pengurusan dan pengarah, selain daripada pihak-pihak yang berkempentingan.


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