Further Evidence On The Relationship Between Board Ownership And Firm Performance in Malaysia

Abstract

This study, based upon a sample of 112 Malaysian firms listed on the Kuala Lumpur Stock Exchange (KLSE) from period 1992-1997, attempts to examine the relationship between board shareholding and firm performance, as measured by Tobin's q. The results suggest that until a certain point of board ‘ownership, there isthe tendency for firm performance to rise with board ownership. Beyond that point a negative relation is observed. The findings are consistent with the works of Mat-Nor et al (1999), Wong and Yek (1991), Denis and Sarin (1999) and McConnell and Servaes (1990) but run counter to those of Yeboah-Duah (1993), and Himmelberg etal (1999). The results imply tht firm owners should be ‘wary of inordinate use of board shareholdings as a mechanism for controlling agency problem in firms.