It’s Within the Family — Executive Remuneration Policies of Nanyang Companies in Malaysia

We investigate agency costs of equity reduction (proxied inversely via excessive executive remuneration) in Malaysian companies. We contribute to the literature on family companies and executive remuneration. We hypothesize that Nanyang companies (ethnic Chinese companies managed according to Confucian tenets) are superior at reducing agency costs of equity. We estimate Ordinary Least Squares regressions, using a sample of 2614 company-years over the period 2013–2019. Our research design reflects adaptations to the Malaysian setting. Data are collected from Bloomberg and annual reports. The results do not support our hypothesis, suggesting that non-Nanyang companies are improving the efficacy of mechanisms that arrest excessive executive remuneration. Our findings indicate that company performance, company size and industry membership are the key determinants of equilibrium executive remuneration in Malaysia. The results also suggest that Malaysian Chief Executive Officers do not abuse their structural power.