The Effect Of Risk Management Committee And Ownership Concentration On Firm Performance In Emerging Markets: Empirical Evidence From Malaysia

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Alhassan Alhaj , Noorhayati Mansor , Ummi Junaidda Hashim


This study examines the effect of Risk Management Committee (RMC) and Ownership Concentration (OWC) on business performance measured by Return on Assets (ROA) and Tobin's Q. It also investigates whether OWC moderates the relationship between RMC and performance of the top 300 non-financial firms listed on Bursa Malaysia. Data was collected for the years 2016 to 2018, representing 807 firm-year observations. Panel-corrected standard error was used to analyse the data. The findings show that RMC has a positive and significant effect on the accounting performance (ROA) and the market performance (Tobin's Q). However, the result also indicates that OWC has a significantly negative direct relationship with both performance measures. This study supports the entrenchment argument that OWC has the motives and ability to manipulate financial indexes for private benefits which may eventually adversely affect prospective investors and may reduce the level of firm performance. The findings suggest that OWC has a significant negative moderating effect on the relationship between RMC and firm performance. This study extends to the theoretical prespective by providing full understanding of the impact of ownership concentration as a moderating factor on the effects between RMC and company’s performance in emerging markets. These results are beneficial for policymakers, investors and regulators in raising the awareness of improving internal monitoring activities in Malaysia to protect minority shareholders and investors from large shareholders’ domination.  

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