Are executive directors paid enough? Evidence from conflicting related-party transactions

Mohd Mohid Rahmat, Nor Suhaila Mohd Ghazali, Nurhidayah Nordin

Research output: Contribution to journalArticle

Abstract

This study examines the association between types (packages) of executive director's remuneration and conflicting related-party transactions (RPT-conflict) among listed companies in Malaysia. The hypotheses are analyzed using a sample of 539 listed companies in Malaysia over the period 2012-2014 with 1,615 observations. The results show that salary (cash-based) and in-kinds remuneration pay to executive director are effective at reducing firm's engagement in RPT-conflict but an executive director fee alone is not attractive enough. The executive directors favor for the combination of remuneration packages, either involving salary and fee, or salary and in-kinds. This study contributes a greater understanding about the effectiveness of different types of executive director's compensation to minimize the firm's engagement with related parties. Additionally, the combination of remuneration package is more attractive and effective at minimizing RPT-conflict than individual payment of director fee or salary. The evidence also contributes to the literature by indicating a compensating relationship between each type of executive director's remuneration and RPT-conflict. The regulators and policy makers, specifically the remuneration committee must concern and seriously consider about the importance relationship between an attractive director's remuneration and RPTs, and thus, takes the right steps to minimize the expropriation risk.

Original languageEnglish
Pages (from-to)111-124
Number of pages14
JournalInternational Journal of Economics and Management
Volume13
Issue number1
Publication statusPublished - 1 Jun 2019

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Related party transactions
Remuneration
Salary
Fees
Malaysia
Listed companies
Expropriation
Politicians
Director compensation
Cash
Payment

Keywords

  • Agency conflict
  • Director's remuneration
  • Malaysia
  • Related party transactions
  • RPT-conflict

ASJC Scopus subject areas

  • Business and International Management
  • Economics, Econometrics and Finance(all)
  • Strategy and Management

Cite this

Are executive directors paid enough? Evidence from conflicting related-party transactions. / Rahmat, Mohd Mohid; Ghazali, Nor Suhaila Mohd; Nordin, Nurhidayah.

In: International Journal of Economics and Management, Vol. 13, No. 1, 01.06.2019, p. 111-124.

Research output: Contribution to journalArticle

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