Book Description
The present study tests the effect of insider and blockholder ownerships on firm performance. It argues that both parties influence firm performance through the adoption of internal governance mechanisms which reflect their investment interests. The sample consists of 177 firms listed on the Bursa Malaysia, with data gathered from their 2004 and 2005 annual reports. Statistical results support the hypothesis that board-related governance mechanisms and executive compensation mediate the relationship between the ownership variables and firm performance. Furthermore, insiders and blockholders were found to compete for board dominance, as each is driven to advance their interests. The fraction of insiders on board was found to exert the strongest positive effect on firm performance. This conforms to the stewardship theory which holds that insiders are in the strongest position to maximize firm wealth as they possess superior information about the firm.