Blockholders, Corporate Governance and the Value of the Firm: A Panel Data Analysis of Malaysian Non-Financial Companies

Abstract

In South-East Asian corporations where ownership is typically highly concentrated, ownership structure plays an important role to align the interests between managers and shareholders. Consequently, blockholders may have personal incentives other than maximizing shareholders’ wealth by exercising their corporate control. With the existence of poor corporate governance structure and lower level of investor protection in Malaysia, this study examines the relationship between blockholder ownership and firm performance. One way fixed effect univariate analysis supports the entrenchment hypothesis, with very low effects, that blockholders expropriate corporate wealth. On the other hand, multivariate analysis reveals the blockholders with higher firm value especially while considering accounting based measure of performance and industry effects. It is also found that Oil and Gas industry exhibit better product market competitions among all industries of Malaysian economy.

Keywords: Ownership Structure, Blockholders, Corporate Control, Agency Problem, Corporate Governance