Institutional investors and director remuneration: do political connections matter?

Abstract

This study examines the relationship between institutional investors and director remuneration in Malaysia against an important institutional backdrop of political connection. 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.

Citation

Aswadi Abdul Wahab, E. and Abdul Rahman, R. (2009), "Institutional investors and director remuneration: do political connections matter?", Hirschey, M., John, K. and Makhija, A.K. (Ed.) Corporate Governance and Firm Performance (Advances in Financial Economics, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 139-169. https://doi.org/10.1108/S1569-3732(2009)0000013008