Institutional Investors and Director Remuneration: Do Political Connections Matter?
42 Pages Posted: 26 Oct 2011
Date Written: 2009
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: Suggested Citation