Institutional Investors and CEO Pay Performance in Malaysian Firms

2018 ◽  
Vol 17 (1) ◽  
pp. 87-102 ◽  
Author(s):  
Tee Chwee Ming ◽  
Yee-Boon Foo ◽  
Ferdinand A. Gul ◽  
Abdul Majid
Keyword(s):  
Firm Performance ◽  
Institutional Investors ◽  
Ceo Compensation ◽  
Positive Association ◽  
Institutional Ownership ◽  
Institutional Investor ◽  
Ceo Pay ◽  
Negative Effect ◽  
Foreign Institutional Investors ◽  
Jel Classifications

ABSTRACT This study uses Malaysian data to examine whether institutional investors affect the association between firm performance and CEO compensation. Overall, we find that total institutional investor ownership has a negative effect on the positive association between firm performance and CEO compensation, which suggests ineffective monitoring. When the institutional investors are categorized into local and foreign, we find that the negative effect is driven by local institutional ownership, consistent with the argument that foreign institutional investors are associated with better monitoring. Our results provide new insights on the association between institutional investors and the CEO compensation-firm performance relationship in an emerging economy. JEL Classifications: G34; J33.

Do Weak Internal Controls Affect Institutional Ownership Decisions?

2018 ◽  
Vol 21 (03) ◽  
pp. 1850019
Author(s):  
Ching-Lung Chen ◽  
Chung-Yu Chen
Keyword(s):  
Risk Perception ◽  
Institutional Investors ◽  
Diagnostic Tests ◽  
Institutional Ownership ◽  
Institutional Investor ◽  
Negative Association ◽  
Internal Controls ◽  
Increase Risk ◽  
Foreign Institutional Investors ◽  
Cash Flow Rights

Weak internal controls should increase risk perception among various contracting parties, e.g., institutional investors. This study examines whether the penalty firms pay for weak internal controls is associated with ownership decisions made by institutional investors in Taiwan and whether such decisions differ from those made by qualified foreign institutional investors (denoted as QFIIs) and local institutional investors. Empirical results indicate that weak internal controls are negatively associated with changes to institutional investor ownership, particularly for QFIIs. Further evidence shows that this negative association is more pronounced for firms with high divergence of control and cash-flow rights. This suggests that, faced with weak internal controls, institutions passively vote with their feet rather than actively monitor their portfolio firms. We demonstrate several diagnostic tests and show that the results are robust in various specifications.

scholarly journals Institutional Investor Attention and Firm Disclosure

2020 ◽  
Vol 95 (6) ◽  
pp. 1-21 ◽  
Author(s):  
Inna Abramova ◽  
John E. Core ◽  
Andrew Sutherland
Keyword(s):  
Significant Variation ◽  
Information Quality ◽  
Institutional Ownership ◽  
Institutional Investor ◽  
Short Term ◽  
Investor Attention ◽  
Bid Ask Spread ◽  
Abnormal Volume ◽  
Passive Investors ◽  
Jel Classifications

ABSTRACT We study how short-term changes in institutional owner attention affect managers' disclosure choices. Holding institutional ownership constant and controlling for industry-quarter effects, we find that managers respond to attention by increasing the number of forecasts and 8-K filings. Rather than alter the decision of whether to forecast or to provide more informative disclosures, attention causes minor disclosure adjustments. This variation in disclosure is primarily driven by passive investors. Although attention explains significant variation in the quantity of disclosure, we find little change in abnormal volume and volatility, the bid-ask spread, or depth. Overall, our evidence suggests that management responds to temporary institutional investor attention by making disclosures that have little effect on information quality or liquidity. JEL Classifications: G23; G32; G34; G12; G14.

scholarly journals CEO Compensation and Firm Performance: The Role of ESG Transparency

2020 ◽  
Vol 4 (2) ◽  
pp. 278
Author(s):  
Chetna Rath ◽  
Florentina Kurniasari ◽  
Malabika Deo
Keyword(s):  
Firm Performance ◽  
Chief Executive Officers ◽  
Ceo Compensation ◽  
Negative Relationship ◽  
Chief Executive ◽  
Long Run ◽  
Ceo Pay ◽  
Executive Officers ◽  
The Impact

Chief executive officers (CEOs) of environmental, social, and governance (ESG) firms are known to take lesser pay and engage themselves in corporate social responsibility activities to achieve the dual objective of the enhancement of firm’s performance as well as benefit for stakeholders in the long run. This study examines the role of ESG transparency in strengthening the impact of firm performance on total CEO pay in ESG firms. A panel of 67 firms for the period of 2014–2019 has been analyzed using the two-step system GMM model, with NSE Nifty 100 ESG Index as the data sample and ESG scores from Bloomberg database as a proxy for transparency. Findings reveal that environmental and governance disclosure scores have the potential to intensify the negative relationship between firm performance and CEO compensation, while social disclosure scores do not. In addition, various firm-specific, board-specific, and CEO-specific attributes have also been considered controls affecting remuneration. This paper contributes to the literature by exploring the effect of exhibiting ESG transparency and its nexus with CEO pay as well as firm performance.

scholarly journals Board structure and institutional ownership at the time of IPO

2017 ◽  
Vol 43 (9) ◽  
pp. 950-965 ◽  
Author(s):  
Suman Neupane ◽  
Biwesh Neupane
Keyword(s):  
Institutional Investors ◽  
Critical Time ◽  
Institutional Ownership ◽  
Board Independence ◽  
Board Structure ◽  
Data Set ◽  
Content Type ◽  
Institutional Holdings ◽  
Foreign Institutional Investors ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of mandatory regulatory provisions on board structure and the influence of such board structure on institutional holdings. Design/methodology/approach The study uses unique hand-collected data set of Indian IPOs during the 2004-2012 period after the corporate governance reforms with the introduction of clause 49 in the listing agreements in 2001. Using OLS regression, the paper empirically analyses the determinants of board size and board independence at the time of the IPOs and the influence of such a board structure on shareholdings by domestic and foreign institutional investors. Findings The authors find that complying with mandatory regulatory provisions does not impede firms from structuring their boards to reflect the firms’ advising and monitoring needs. The authors also find that complying with provisions have positive implication for the firm, as firms with greater board independence appear to attract more foreign institutional investors. Originality/value To the authors’ best knowledge, this is the first study to examine the issue in a regime where regulation mandates the composition of the board of directors. The paper also extends the literature on institutional holdings by providing evidence on the impact of board structure on institutional ownership at a critical time in a firm’s life cycle when concerns for endogeneity for empirical investigations are weaker.

Foreign Institutional Investors and Corporate Voluntary Disclosure Around the World

2019 ◽  
Vol 94 (5) ◽  
pp. 319-348 ◽  
Author(s):  
Albert Tsang ◽  
Fei Xie ◽  
Xiangang Xin
Keyword(s):  
Institutional Investors ◽  
Voluntary Disclosure ◽  
Home Country ◽  
Investor Protection ◽  
Institutional Ownership ◽  
Management Forecasts ◽  
Disclosure Requirements ◽  
The World ◽  
Foreign Institutional Investors ◽  
The Impact

ABSTRACT We examine the impact of foreign institutional investors on firms' voluntary disclosure practices measured by management forecasts. In a sample of 32 non-U.S. countries, we find that, on average, foreign institutional investments lead to improved voluntary disclosure, and their impact is larger than that of domestic institutional investors. These results are more pronounced when foreign institutional investors (1) are unfamiliar with the firm's home country, (2) have longer investment horizons, and (3) are from countries with stronger investor protection and disclosure requirements than the firm's home country. However, we also find some evidence of voluntary disclosure deterioration in firms with foreign institutional investors from countries with inferior disclosure requirements and securities regulations and with concentrated foreign institutional ownership. Overall, our results suggest that the relation between foreign institutional investors and voluntary disclosure is much richer and more complex than what has been documented for domestic institutional investors in the literature.

Accounting and Stock Price Performance in Dynamic CEO Compensation Arrangements

2003 ◽  
Vol 78 (1) ◽  
pp. 143-168 ◽  
Author(s):  
John F. Boschen ◽  
Augustine Duru ◽  
Lawrence A. Gordon ◽  
Kimberly J. Smith
Keyword(s):  
Firm Performance ◽  
Stock Price ◽  
Ceo Compensation ◽  
Accounting Performance ◽  
Financial Gain ◽  
Price Performance ◽  
Long Run ◽  
Initial Effect ◽  
Ceo Pay

In this study we examine the long-run effects of unexpected firm performance on CEO compensation. We find that unexpectedly good accounting performance is initially associated with increases in CEO pay. However, this initial effect soon reverses, and is followed by lower CEO pay in later years. Overall, the CEO's long-run cumulative financial gain from unexpectedly good accounting performance is not significantly different from zero. In contrast, unexpectedly good stock price performance is associated with increases in CEO pay for several years. Thus, the CEO's long-run cumulative financial gain from unexpectedly good stock price performance is positive and significant.

scholarly journals Impact of gender and ethnic composition of South African boards of directors on intellectual capital performance

2006 ◽  
Vol 2 (1) ◽  
pp. 7-22 ◽  
Author(s):  
Mitchell Van der Zahn
Keyword(s):  
Firm Performance ◽  
South African ◽  
Intellectual Capital ◽  
Boards Of Directors ◽  
Positive Association ◽  
Positive Influence ◽  
Ethnic Composition ◽  
Inside Directors ◽  
Negative Effect ◽  
Using Data

This study examines the association between the gender and ethnic composition of boards of directors and firm performance in a transitional nation. In contrast to prior research that largely focuses on firm performance within a financial context, this study concentrates on intellectual capital performance. Using data collected from 84 South African, empirical results indicate a positive association between the percentage of female and non-white directors on the board and a firm’s intellectual capital performance. Additional analysis shows the designation of female directors as an insider has a negative effect of intellectual capital performance. Designation of female and non-white directors as outsiders, meanwhile, has a positive influence on a firm’s intellectual capital performance. Finally, there was no association between the percentage of non-white inside directors on the board and intellectual capital performance.

scholarly journals The Overconfidence Of Boards And The Increase In CEO Pay Over Time

2014 ◽  
Vol 30 (6) ◽  
pp. 1901 ◽  
Author(s):  
Gregory L. Nagel
Keyword(s):  
Firm Performance ◽  
Institutional Investors ◽  
Bargaining Power ◽  
Alternative Explanation ◽  
Direct Evidence ◽  
Upward Trend ◽  
Ceo Pay ◽  
Survey Results ◽  
Over Time

This paper is based on Robert Shillers view that hiring of external CEOs is excessive due to boards overconfidence and causes reduced firm performance. External hire selections provide all CEOs with bargaining power. I show excessive external hiring provides an alternative explanation (excessive bargaining power) for the upward trend in CEO pay since 1945 that is largely consistent with the observed facts. A survey of the direct evidence on external hires performance provides uniform support for Shillers view after accounting for research supporting alternative views that only includes CEOs who survive. After adjusting for survival bias, the survey results consistently suggest that firms predominantly realize greater performance from internal promotion, all else equal. Overall, this papers findings increase support for succession through internal executive promotion, and suggest that institutional investors can expect greater bargaining power and wealth by advocating for internal hires more often.

scholarly journals Does board interlock control high-tech firm performance? Evidence from ASEAN's Growth Triangle Countries

2021 ◽  
Vol 12 (2) ◽  
pp. 117
Author(s):  
Elisa Tjondro ◽  
Ning Chang ◽  
Iline Lianata ◽  
Veronica Yuliani ◽  
Nathasa Prayitno
Keyword(s):  
Firm Performance ◽  
Positive Association ◽  
High Tech ◽  
Panel Regression ◽  
Company Performance ◽  
Strategic Information ◽  
Negative Effect ◽  
Asean Countries ◽  
The Right

The aim of this study is to explain the board interlock association on high-tech firm performance in three growth ASEAN countries. The research samples were 109 high-tech listed manufacturing firms, consisting of 38 Indonesian firms, 37 Malaysian firms, and 34 Thai firms in the 2015-2018 period. The study used panel regression analysis. The research found that corporate governance through interlock directorates is a determinant of high-tech firm performance. The low human capital with high-tech capabilities in ASEAN countries can be overcome by interlocking and facilitating companies to access strategic information. This study also found a positive association between director woman interlock and corporate performance. On the other hand, an independent director who does interlocking actually has a negative effect on company performance. This research is the first research on board interlock in high-tech firms in ASEAN growth countries, Indonesia, Malaysia, and Thailand. There is still limited research involving more than one country, especially developing countries, in studying the interlock board relationship on the company performance. The highlight of this study is to compare the effects of the three interlocks, interlocking directorate, woman interlock, and independent interlock, and their associations on the profitability of high-tech firms. Investors can have an in-depth understanding of the role of the type of interlock that affects the profitability and make the right decision in investing.

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