Financial Constraints, Executive Compensations and Large Shareholders in Malaysia

The study investigates the issues of financial constraints in Malaysia. Using a sample of 196 Malaysian public listed firms, the findings show that generally there is no issue of financial constraints in Malaysia. However, the presence of large shareholder reduces the use of external financing and emphasis on internal cash flow for firms' investment. The coalition effects of top three large shareholders are found to reduce the dependence on internal cash flow for investment. Moreover, directors' compensation measured as incentive ratio is found to exuberating investments through internal cash flow and external debt financing