How Does Directors’ Remuneration and Board Structure Impact on Firm Performance in Malaysia Telecommunication Industry?

Abstract

Remuneration is broadly used as an incentive that affects decisions made and strategies planned by directors which cause great impact on firm performance. This study aims to investigate the relationship among directors’ remuneration, board size, and firm performance of Malaysian listed companies under Telecommunication Industry. The firm’s performance is measured by return on assets (ROA). This study consists of 25 observations with a sample of five Malaysian listed companies for the period of 2013 to 2017. The regression results show directors’ remuneration and board size have negative relationship with firm performance. This suggests that high remuneration does not able to motivate and retain directors in order to perform their duty and work harder for the best interest of shareholders. The result also shows that larger boards unable to ensure effectiveness in monitoring management and thus, did not associated with better performance. For future research, it is recommended that this study be expanded using more samples from other industries and other measurement of firm performances such as growth and ratings.

The Effect of Board Structure on Egyptian Mutual Fund Performance: A Structural Equation Model Analysis

“…In agency theory, the corporate boards, assuming the power to look after the firm, involve in arm's length transaction with CEO and design such compensation plans which provide CEO with efficient incentives to maximize the shareholder value, and hence reduce moral hazard problem arising from separation of ownership from control. This predicts a positive link between CEO compensation and firm performance (Ibrahim et al, 2019). Baysinger and Butler (1985) suggest that there is a positive relationship between independent directors and performance.…”