SENSITIVITY ANALYSIS OF MANAGERIAL OWNERSHIP AND COMPANY PERFORMANCE IN MALAYSIA

Abstract

This study investigates the sensitivity of managerial ownership on company performance of public listed companies in Malaysia. Three years panel data of 730 Malaysian public listed companies were examined. The results showed that that the managerial ownership affected the firm performance at different levels of ownership. The low and moderate level of managerial ownership showed a positive and significant with ROA, ROE, Tobin’s Q and share price. This is due to the low and moderate level of ownership, the managers having aligned their interests with those of the shareholders. However, the concentrated managerial ownership had negative and significant relationship with all performance indicators. Therefore, the involvement of management in monitoring and controlling activities fail to reduce agency conflict in the emerging economy. This study is perhaps the first that explain the different level of managerial ownership in relation to company performance utilizing extended agency theory in developing country.