Blockholder Ownership as Governance Mechanism on Firm Performance: Evidence From Malaysia

Abstract

We examined the relationship between blockholder ownership and firm performance in the context of high concentrated ownership in Malaysia coupled with weak regulatory framework. Blockholder ownership is used as monitoring device to verify the significant role in managerial decisions accordance with maximizing shareholders’ wealth. Consequently, blockholders may have personal incentive to the expropriation of minority shareholders’ wealth by exercising their corporate control. We found a positive significant relationship with small effect of beta coefficients by both market and accounting based measurements. The positive relationship of blockholders as institutions is the conformity of monitoring hypothesis. The results indicate a very week monitoring impact of blockholders on executives’ decisions that improve the firm performance by reducing the agency costs. Additionally, the significant low positive effect of profit volatility is representing the efficacy of blockholders until a certain level.