Inside the family firms: The impact of family and institutional ownership on executive remuneration

This study empirically examines the impact of ownership structure on executive remuneration of listed family firms in Malaysia. Fixed effects model as the panel analysis of 279-listed family firms from 2010 to 2014 shows that institutional investors could not represent the minority shareholders' interest in curbing the expropriation via executive remuneration by the controlling family shareholders. When the firm CEOs are non-family directors, both domestic and foreign institutional investors could exert a significant negative impact on executive remuneration. Thus, this study provides a theoretical contribution by affirming that the Type-II agency conflict between controlling shareholders and minority shareholders in family firms is ameliorated when the firm CEOs have no family relationship with the controlling shareholders. In addition, this study also unveils that domestic and foreign institutional investors have a different impact on the executive remuneration, where the governance role of the former prevails over the latter. The findings of this study would be useful for the policy-makers and regulators such as Securities Commission Malaysia and Minority Shareholder Watchdog Group to assess the expropriation issue and corporate governance in family firms.