The Influence of Institutional Shareholder Activism as a Corporate Governance Monitoring Mechanism in Malaysia
Not many studies have been undertaken on shareholder activism in emerging economies, including Malaysia. Shareholder activism in emerging economies is on the rise. This paper seeks to comprehend the elements of this activism that are unique to Malaysia, specifically with respect to how the agency problem is controlled through shareholder activism in improving corporate governance practices within target companies. Through shareholder activism, shareholders make contact with a target company to voice their dissatisfaction, suggestions, or recommendations. This paper utilises agency theory to explain institutional shareholder activism. This theory has been extensively used within literature on corporate governance with regards to shareholder activism. The effectiveness of shareholder activism in improving corporate governance will be examined as well. This research provides a further understanding of shareholder activism in emerging economies, such as Malaysia; this research also has the potential to enhance shareholder activism and corporate governance practices in general.
[1] Armour, J. & Cheffins, B. R. 2009. 'The Rise and Fall (?) of Shareholder
Activism by Hedge Funds.' SSRN eLibrary.
[2] Stowell, D. P. 2010. 'Shareholder Activism and Impact on Corporations.'
An Introduction to Investment Banks, Hedge Funds, and Private Equity:
241-56. San Diego: Academic Press.
[3] Renneboog, L. & Szilagyi, P. G. 2011. 'The role of shareholder
proposals in corporate governance.' Journal of Corporate Finance, 17:1,
167-88.
[4] Jensen, M. C. & Meckling, W. H. 1976. 'Theory of the Firm: Managerial
Behaviour, Agency Costs and Ownership Structure.' Journal of
Financial Economics, 3:4, 305-60.
[5] Brav, A. & Mathews, R. D. 2011. 'Empty voting and the efficiency of
corporate governance.' Journal of Financial Economics, 99:2, 289-307.
[6] Abdul Jalil, A. & Abdul Rahman, R. 2010. 'Institutional investors and
earnings management: Malaysian evidence.' Journal of Financial
Reporting and Accounting, 8:2, 110-27.
[7] Brav, A., Jiang, W. E. I., Partnoy, F. & Thomas, R. 2008. 'Hedge Fund
Activism, Corporate Governance, and Firm Performance.' The Journal
of Finance, 63:4, 1729-75.
[8] Arafat, M. & Dallas, G. 2011. 'Corporate Governance in Emerging
Markets: Why It Matters to Investors- and What They Can Do About It.'
Global Corporate Governance Forum, 1:22.
[9] Gillan, S. L. & Starks, L. T. 1998. 'A Survey of Shareholder Activism:
Motivation and Empirical Evidence ' Contemporary Finance Digest,
Vol. 2:No. 3, 10-34.
[10] Guay, T., Doh, J. P. & Sinclair, G. 2004. 'Non-governmental
Organisations, Shareholder Activism and Socially Responsible
Investments: Ethical, Strategic, and Governance Implications.' Journal
of Business Ethics, Vol. 52, 125-39.
[11] Gillan, S. L. & Starks, L. T. 2000. 'Corporate governance proposal and
shareholder activism: the role of institutional investors.' Journal of
Financial Economics, 57:1, 275-305.
[12] Hadani, M., Goranova, M. & Khan, R. 2011. 'Institutional investors,
shareholder activism, and earnings management.' Journal of Business
Research, 64:12, 1352-60.
[13] Fama, E. F. & Jensen, M. C. 1983. 'Separation of Ownership and
Control.' Journal of Law and Economics, 26:1, 301-25.
[14] Firth, M. 1979. 'The Profitability of Takeovers and Mergers.' The
Economic Journal, 89:354, 316-28.
[15] Gillan, S. L. & Starks, L. T. 2003. 'Corporate governance, corporate
ownership, and the role of institutional investors: A global perspective.'
Journal of Applied Finance, 13:4, 4-22.
[16] Pinto, M. 2006. 'The Role of Institutional Investors in the Corporate
Governance.' German Working Papers in Law and Economics, Vol.
2006:Paper 1.
[17] Noe, T. 2002. 'Investor activism and financial market structure.' Review
of Financial Studies, 1:15, 289-317.
[18] Shleifer, A. & Vishny, R. 1986. 'Large shareholders and corporate
control.' Journal of Political Economy, 1:52, 227-52.
[19] Gillan, S. L. & Starks, L. T. 2007. 'The Evolution of Shareholder
Activism in the United States.' Journal of Corporate Finance, 19:1, 55-
73.
[20] Lee, D. W. & Park, K. S. 2009. 'Does institutional activism increase
shareholder wealth? Evidence from spillovers on non-target companies.'
Journal of Corporate Finance, 15:1, 488-504.
[21] Bainbridge, S. M. 2008. 'Investor Activism: Reshaping the Playing
Field?' SSRN eLibrary.
[22] Bainbridge, S. M. 2000. 'Constraints on Shareholder Activism in the
United States and Slovenia.' SSRN eLibrary.
[23] Ruiz-Mallorquí, M. V. & Santana-Martín, D. J. 2011. 'Dominant
institutional owners and firm value.' Journal of Banking and Finance,
35:1, 118-29.
[24] Starks, L. 2007. The Influence of Institutional Investors on Financial
Markets through Their Trading and Governance Monitoring. FMA
Doctoral Seminar.
[25] Singam, K. 2003. 'Corporate Governance in Malaysia.' Bond Law
review, 15:1, 314-44.
[26] Claessens, S. & Djankov, S. 1999. 'Who Controls East Asian
Corporations?' SSRN eLibrary. Claessens, S., Djankov, S., Joseph, F. &
Larry, L. 1999. 'The expropriation of minority shareholders: Evidence
from East Asia.' Washington, DC. : World Bank.
[27] Abdul Wahab, E. A. & Abdul Rahman, R. 2009. 'Institutional investors
and director remuneration: do political connections matter?' Advance in
Financial Economics, 13:1, 139-69.
[28] Mohd Ghazalli, N. A. 2007. 'Ownership structure and corporate social
responsibility disclosure: some Malaysian evidence.' Corporate
Governance, Vol. 7:No. 3, 251-66.
[29] Satkunasingam, E. & Shanmugam, B. 2006. 'The Consequences of
Culture on Shareholder Activism in Malaysia.' Journal of Applied
Management Accounting Research, 4:1, 45-56.
[30] Thilainathan, R. 1999. 'Corporate Governance & Restructuring in
Malaysia.' World Bank/ OECD
[31] Abdul Rahman, R. & Mohamed Ali, F. H. 2006. 'Board, audit
committee, culture and earnings management: Malaysian evidence.'
Managerial Auditing Journal, 21:7, 783-804.
[32] Abdul Wahab, E. A., How, J. & Verhoeven, P. 2008. 'Corporate
Governance and Institutional Investors: Evidence From Malaysia.' Asian
Academy of Management of Accounting and Finance, 4:2, 64-90.
[33] Ahmad, R., Aliahmed, H. J. & Ab Razak, N. H., Sr. 2008. 'Government
Ownership and Performance: An Analysis of Listed Companies in
Malaysia.' SSRN eLibrary.
[34] Sulong, Z. & Mat Nor, F. 2008. 'Dividends, Ownership Structure and
Board Governance on Firm Value: Empirical Evidence From Malaysian
Public Listed Company.' Malaysian Accounting Review, 7:2, 55-94.
[35] Li, D., Moshirian, F., Pham, P. K. & Zein, J. 2004. 'When Financial
Institutions are Large Shareholders- The Role of Corporate Governance
Environments.' University of New South Wales.
[36] Hashim, H. A. & Devi, S. S. 2007. 'Corporate Governance, Ownership
Structure and Earnings Quality: Malaysian Evidence.' In M. Tsamenyi &
S. Uddin (Eds.) Research in Accounting in Emergence Economies: 97-
123. Emerald Group Publishing Limited.
[37] Employees Provident Fund 2010. 'Voting Guidelines.' Kuala Lumpur:
Employees Provident Fund.
[38] Retirement Fund Incorporated 2011. 'Annual Report 2011.' Kuala
Lumpur: Retirement Fund Incorporated.
[39] Thomas, R. S. 2008. 'The Evolving Role of Institutional Investors in
Corporate Governance and Corporate Litigation.' Vanderbilt Law
Review, 61:2, 300-13.
[40] Licht, A. N., Goldschmidt, C. & Schwart, S. H. 2005. 'Culture, Law, and
Corporate Governance ' International Review of Law and Economics:25,
229-55.
[41] Admati, A. R., Pfleiderer, P. & Zechner, J. 1994. 'Large Shareholder
Activism, Risk Sharing, and Financial Market Equilibrium.' Journal of
Political Economy, 102:6, 1097-130
[1] Armour, J. & Cheffins, B. R. 2009. 'The Rise and Fall (?) of Shareholder
Activism by Hedge Funds.' SSRN eLibrary.
[2] Stowell, D. P. 2010. 'Shareholder Activism and Impact on Corporations.'
An Introduction to Investment Banks, Hedge Funds, and Private Equity:
241-56. San Diego: Academic Press.
[3] Renneboog, L. & Szilagyi, P. G. 2011. 'The role of shareholder
proposals in corporate governance.' Journal of Corporate Finance, 17:1,
167-88.
[4] Jensen, M. C. & Meckling, W. H. 1976. 'Theory of the Firm: Managerial
Behaviour, Agency Costs and Ownership Structure.' Journal of
Financial Economics, 3:4, 305-60.
[5] Brav, A. & Mathews, R. D. 2011. 'Empty voting and the efficiency of
corporate governance.' Journal of Financial Economics, 99:2, 289-307.
[6] Abdul Jalil, A. & Abdul Rahman, R. 2010. 'Institutional investors and
earnings management: Malaysian evidence.' Journal of Financial
Reporting and Accounting, 8:2, 110-27.
[7] Brav, A., Jiang, W. E. I., Partnoy, F. & Thomas, R. 2008. 'Hedge Fund
Activism, Corporate Governance, and Firm Performance.' The Journal
of Finance, 63:4, 1729-75.
[8] Arafat, M. & Dallas, G. 2011. 'Corporate Governance in Emerging
Markets: Why It Matters to Investors- and What They Can Do About It.'
Global Corporate Governance Forum, 1:22.
[9] Gillan, S. L. & Starks, L. T. 1998. 'A Survey of Shareholder Activism:
Motivation and Empirical Evidence ' Contemporary Finance Digest,
Vol. 2:No. 3, 10-34.
[10] Guay, T., Doh, J. P. & Sinclair, G. 2004. 'Non-governmental
Organisations, Shareholder Activism and Socially Responsible
Investments: Ethical, Strategic, and Governance Implications.' Journal
of Business Ethics, Vol. 52, 125-39.
[11] Gillan, S. L. & Starks, L. T. 2000. 'Corporate governance proposal and
shareholder activism: the role of institutional investors.' Journal of
Financial Economics, 57:1, 275-305.
[12] Hadani, M., Goranova, M. & Khan, R. 2011. 'Institutional investors,
shareholder activism, and earnings management.' Journal of Business
Research, 64:12, 1352-60.
[13] Fama, E. F. & Jensen, M. C. 1983. 'Separation of Ownership and
Control.' Journal of Law and Economics, 26:1, 301-25.
[14] Firth, M. 1979. 'The Profitability of Takeovers and Mergers.' The
Economic Journal, 89:354, 316-28.
[15] Gillan, S. L. & Starks, L. T. 2003. 'Corporate governance, corporate
ownership, and the role of institutional investors: A global perspective.'
Journal of Applied Finance, 13:4, 4-22.
[16] Pinto, M. 2006. 'The Role of Institutional Investors in the Corporate
Governance.' German Working Papers in Law and Economics, Vol.
2006:Paper 1.
[17] Noe, T. 2002. 'Investor activism and financial market structure.' Review
of Financial Studies, 1:15, 289-317.
[18] Shleifer, A. & Vishny, R. 1986. 'Large shareholders and corporate
control.' Journal of Political Economy, 1:52, 227-52.
[19] Gillan, S. L. & Starks, L. T. 2007. 'The Evolution of Shareholder
Activism in the United States.' Journal of Corporate Finance, 19:1, 55-
73.
[20] Lee, D. W. & Park, K. S. 2009. 'Does institutional activism increase
shareholder wealth? Evidence from spillovers on non-target companies.'
Journal of Corporate Finance, 15:1, 488-504.
[21] Bainbridge, S. M. 2008. 'Investor Activism: Reshaping the Playing
Field?' SSRN eLibrary.
[22] Bainbridge, S. M. 2000. 'Constraints on Shareholder Activism in the
United States and Slovenia.' SSRN eLibrary.
[23] Ruiz-Mallorquí, M. V. & Santana-Martín, D. J. 2011. 'Dominant
institutional owners and firm value.' Journal of Banking and Finance,
35:1, 118-29.
[24] Starks, L. 2007. The Influence of Institutional Investors on Financial
Markets through Their Trading and Governance Monitoring. FMA
Doctoral Seminar.
[25] Singam, K. 2003. 'Corporate Governance in Malaysia.' Bond Law
review, 15:1, 314-44.
[26] Claessens, S. & Djankov, S. 1999. 'Who Controls East Asian
Corporations?' SSRN eLibrary. Claessens, S., Djankov, S., Joseph, F. &
Larry, L. 1999. 'The expropriation of minority shareholders: Evidence
from East Asia.' Washington, DC. : World Bank.
[27] Abdul Wahab, E. A. & Abdul Rahman, R. 2009. 'Institutional investors
and director remuneration: do political connections matter?' Advance in
Financial Economics, 13:1, 139-69.
[28] Mohd Ghazalli, N. A. 2007. 'Ownership structure and corporate social
responsibility disclosure: some Malaysian evidence.' Corporate
Governance, Vol. 7:No. 3, 251-66.
[29] Satkunasingam, E. & Shanmugam, B. 2006. 'The Consequences of
Culture on Shareholder Activism in Malaysia.' Journal of Applied
Management Accounting Research, 4:1, 45-56.
[30] Thilainathan, R. 1999. 'Corporate Governance & Restructuring in
Malaysia.' World Bank/ OECD
[31] Abdul Rahman, R. & Mohamed Ali, F. H. 2006. 'Board, audit
committee, culture and earnings management: Malaysian evidence.'
Managerial Auditing Journal, 21:7, 783-804.
[32] Abdul Wahab, E. A., How, J. & Verhoeven, P. 2008. 'Corporate
Governance and Institutional Investors: Evidence From Malaysia.' Asian
Academy of Management of Accounting and Finance, 4:2, 64-90.
[33] Ahmad, R., Aliahmed, H. J. & Ab Razak, N. H., Sr. 2008. 'Government
Ownership and Performance: An Analysis of Listed Companies in
Malaysia.' SSRN eLibrary.
[34] Sulong, Z. & Mat Nor, F. 2008. 'Dividends, Ownership Structure and
Board Governance on Firm Value: Empirical Evidence From Malaysian
Public Listed Company.' Malaysian Accounting Review, 7:2, 55-94.
[35] Li, D., Moshirian, F., Pham, P. K. & Zein, J. 2004. 'When Financial
Institutions are Large Shareholders- The Role of Corporate Governance
Environments.' University of New South Wales.
[36] Hashim, H. A. & Devi, S. S. 2007. 'Corporate Governance, Ownership
Structure and Earnings Quality: Malaysian Evidence.' In M. Tsamenyi &
S. Uddin (Eds.) Research in Accounting in Emergence Economies: 97-
123. Emerald Group Publishing Limited.
[37] Employees Provident Fund 2010. 'Voting Guidelines.' Kuala Lumpur:
Employees Provident Fund.
[38] Retirement Fund Incorporated 2011. 'Annual Report 2011.' Kuala
Lumpur: Retirement Fund Incorporated.
[39] Thomas, R. S. 2008. 'The Evolving Role of Institutional Investors in
Corporate Governance and Corporate Litigation.' Vanderbilt Law
Review, 61:2, 300-13.
[40] Licht, A. N., Goldschmidt, C. & Schwart, S. H. 2005. 'Culture, Law, and
Corporate Governance ' International Review of Law and Economics:25,
229-55.
[41] Admati, A. R., Pfleiderer, P. & Zechner, J. 1994. 'Large Shareholder
Activism, Risk Sharing, and Financial Market Equilibrium.' Journal of
Political Economy, 102:6, 1097-130
@article{"International Journal of Business, Human and Social Sciences:59544", author = "Maizatul A. Musa", title = "The Influence of Institutional Shareholder Activism as a Corporate Governance Monitoring Mechanism in Malaysia", abstract = "Not many studies have been undertaken on shareholder activism in emerging economies, including Malaysia. Shareholder activism in emerging economies is on the rise. This paper seeks to comprehend the elements of this activism that are unique to Malaysia, specifically with respect to how the agency problem is controlled through shareholder activism in improving corporate governance practices within target companies. Through shareholder activism, shareholders make contact with a target company to voice their dissatisfaction, suggestions, or recommendations. This paper utilises agency theory to explain institutional shareholder activism. This theory has been extensively used within literature on corporate governance with regards to shareholder activism. The effectiveness of shareholder activism in improving corporate governance will be examined as well. This research provides a further understanding of shareholder activism in emerging economies, such as Malaysia; this research also has the potential to enhance shareholder activism and corporate governance practices in general.
", keywords = "Agency Theory, Corporate Governance, Emerging Economies, Institutional Shareholder Activism, Malaysia.", volume = "6", number = "11", pages = "3214-5", }
