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Does the Founder CEO Receive a Higher Pay for the Firm’s Performance? Evidence from Malaysia

Author

Listed:
  • Swee-Sim Foong

    (School of Distance Education, Universiti Sains Malaysia)

  • Boon-Leong Lim

    (Peninsula College)

Abstract

This paper examines whether firms run by a founder chief executive officer (CEO) have higher pay and whether their power sources from chairing the board, remuneration committee, tenureship, or share ownership affect the pay-performance nexus. Data for the study was hand-collected amongst 362 family-owned firms listed in Bursa Malaysia from 2009 to 2015 and analysed via the generalized method of moments (GMM) system to address endogeneity. The results showed that initially there was a significant positive pay-performance relationship in Malaysian family-owned firms; however, the founder CEOs had a weak influence on the pay-performance nexus. Secondly, the founder CEOs’ influences on the pay-performance nexus mainly came from their ownership power and their structural power as the chairman of the board. Thirdly, the pay-performance nexus tended to be positive and stronger when the family member of the CEO was chairing the board of directors and remuneration committee, instead of themselves, but the relationship changed to negative when more independent directors sat on the board, including a remuneration committee. The findings offered some policy implications for the regulators to enhance corporate transparency on the directors’ remuneration and ownership.

Suggested Citation

  • Swee-Sim Foong & Boon-Leong Lim, 2023. "Does the Founder CEO Receive a Higher Pay for the Firm’s Performance? Evidence from Malaysia," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 60(1), pages 1-28, January.
    • Handle: RePEc:mjr:journl:v:60:y:2023:i:1:p:1-28
    DOI: 10.22452/MJES.vol60no1.1
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    More about this item

    Keywords

    Pay; performance; founder CEO; family firm; corporate governance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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