Institutional Investors and Director Remuneration: Do Political Connections Matter?

42 Pages Posted: 26 Oct 2011

See all articles by Effiezal Aswadi Abdul Wahab

Effiezal Aswadi Abdul Wahab

Curtin University - School of Accounting

Rashidah Abdul Rahman

Universiti Teknologi MARA (UiTM) - Bureau of Research and Consultancy (BRC)

Date Written: 2009

Abstract

This study examines the relationship between institutional investors and director remuneration in Malaysia against an important institutional backdrop of political connections. Our panel analysis of 434 firms from 1999 to 2003 finds a negative relationship between institutional ownership and director remuneration suggesting the effectiveness of institutional monitoring. Although we find no evidence to suggest a politically-determined remuneration scheme, the negative relationship between institutional ownership and remuneration becomes less in politically-connected firms. This suggests that political connections mitigate institutional monitoring in relationship-based economies.

Keywords: Institutional Investors, Director Remuneration, Political Connection

JEL Classification: G21, G22, G23, J33, P48

Suggested Citation

Abdul Wahab, Effiezal Aswadi and Rahman, Rashidah Abdul, Institutional Investors and Director Remuneration: Do Political Connections Matter? (2009). Advances in Financial Economics, Vol. 13, 2009, Available at SSRN: https://ssrn.com/abstract=1949792

Effiezal Aswadi Abdul Wahab (Contact Author)

Curtin University - School of Accounting ( email )

Australia

Rashidah Abdul Rahman

Universiti Teknologi MARA (UiTM) - Bureau of Research and Consultancy (BRC) ( email )

40450 Shah Alam
Malaysia
+03 55442090 (Phone)

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