S.Afr.J.Bus.Manage.2011,42(3)

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Agency costs, corporate governance mechanisms and performance of public listed family firms in Malaysia
H. Ibrahim*
School of Management, Universiti Sains Malaysia, 11800 USM, Penang, Malaysia haslindar@usm.my

F.A. Samad
Faculty of Business and Accountancy, University of Malaya, 50603 Kuala Lumpur, Malaysia mfazilah@um.edu.my Received June 2009 We compare corporate governance and performance between family and non-family ownership of public listed companies in Malaysia from 1999 through 2005 measured by Tobin’s Q and ROA. We also examine the governance mechanisms as a tool in monitoring agency costs based on asset utilization ratio and expense ratio as proxy for agency costs. We find that on average firm value is lower in family firms than non-family firms, while board size, independent director and duality have a significant impact on firm performance in family firms as compared to non family firms. We also find that these governance mechanisms have significant impact on agency costs for both family and non family firms.

*To whom all correspondence should be addressed.

Introduction
The family-controlled firm or family ownership is the most common form of business organization in the world. A various stream of literature explains that family ownership is central in most countries. La Porta, Lopez-De-Silanes, and Shleifer (1999) studied the 20 largest publicly traded companies in the richest 27 countries worldwide and found most companies are private and the ownership of listed firms is highly concentrated which highlighted family ownership as a significant corporation. The family-owned or controlled businesses account for over 80 percent of all firms in the U.S. Indeed, families are present in one third of the S&P 500 and hold nearly 18 percent of firms’ equity stake (Anderson & Reeb, 2003). Ownership structure has been widely