Family Firms, Directors’ Remuneration, Expropriation and Firm Value: Evidence of the Role of Independent Directors’ Tenure within the Remuneration Committee in Malaysia

Abstract

This manuscript is about the influence of directors’ remuneration on firm performance and whether independent directors’ tenure in the remuneration committee moderates this relationship. The results show that within family corporations in industries which are not exclusive, non-executive directors’ remuneration have a significant negative relationship with firm performance. Family firms have a stronger significant negative relationship than non-family firms. Within family firms in non-exclusive industries, there is also a positive moderating effect of independent directors’ tenure within the remuneration committee on the influence of non-executive directors’ remuneration on firm performance. In this case, corporations owned by families have a stronger positive moderating effect compared to non-family firms. Our study has significant policy implications with respect to how the Securities Commission (SC) should design and implement proper rules and regulations to govern remuneration of non-executive directors’ remuneration as well as how the SC should govern the tenure of the independent directors within the remuneration committee in East Asian emerging market firms where Agency Problem Type II is prevalent and ownership is highly concentrated