Asian Journal of Accounting and Governance 13: 27–39 (2020) ISSN 2180-3838 (http://dx.doi.org/10.17576/AJAG-2020-13-03) What Determines Executives’ Remuneration in Malaysian Public Listed Companies? Mazair Ghasemi & Nazrul Hisyam Ab Razak ABSTRACT This paper examines the impact of executives’ ownership, frm proftability, board size and its components, as well as some other fnancial factors, on executives’ remuneration in the context of Malaysia. Using a sample of 2403 frm- years during 2006-2014 among listed companies in Bursa Malaysia, the fndings show that frm proftability, leverage and number of non-executive directors have negative efects on executives’ remuneration. Conversely, dividends, percentage of executives’ directors, board size and size of frms have positive efects on executives’ remuneration. There is no evidence that executives’ ownership has signifcant efects on their remuneration. From the viewpoint of the agency theory about the efects of larger boards, frm proftability, and executive percentage on executives’ remuneration, it is perceived that the weak governance exists among listed companies in the Malaysian market. The insignifcant impact of executives’ ownership on their remuneration is an important fnding of this research. Keywords: Agency Theory; Bursa Malaysia; Board of directors; executive remuneration; executive ownership Introduction Recent financial crisis has raised serious criticisms, particularly regarding the role of corporate governance (CG) in determining executive remuneration (Bebchuk, Cohen, & Spamann 2010; Fahlenbrach & Stulz 2011; Kirkpatrick 2009). The enhancement of CG standards and disclosures has been at the forefront of international arguments in recent times, and the remuneration of executives and directors is one of the key issues in this debate. The main belief, derived from the principal-agent structure, is that, a well-designed remuneration contract helps to motivate executives to maximize shareholder wealth (Jensen & Murphy 1990; Murphy 1999). Furthermore, executive remuneration is an important tool for both encouraging and retaining executives in a frm. The ideal executives’ remuneration attempts to attract managers and incentivize them to develop growth opportunities, exert efforts, and minimize inefficient investments. The amelioration of CG standards and information disclosure has been at the forefront of worldwide debates in the recent times, and the remuneration of executives and directors is one of the main issues in these debates (Fahlenbrach & Stulz 2011; Kirkpatrick 2009). In addition, family ownership and managerial ownership show an uncertainty in regard to the managers’ remuneration (Vicknes 2003). Likewise, directors’ payouts in GLCs have grown approximately 12% less compared to other companies. The results of a study by Kaur and Rahim (2007) showed the aggregate payout to directors in a sample of 639 frms that are listed in KLSE, is increased by 23% from RM1.3 billion to RM1.6 billion during a period of six years (2001 to 2006). Moreover, the executives’ remuneration and its determinants have been relatively ignored in that study. In addition, Hamsawi (2011) indicated that the sum of the directors’ payout in the top 20 frms was increased by 22% only in 2009. Therefore, Executive remuneration is vigorously debated in Malaysia (Wooi & Ming 2009). Hence, there were different remuneration policies among the listed companies in Malaysia that caused difculty for applying executive remuneration as an instrument for reducing the agency confict. The insignificant or weak relationship between proftability and remuneration has been mentioned in some Malaysian studies (Nahar Abdullah 2006; Wooi & Ming 2009). Although the issue of executives’ remuneration has not been investigated in depth in the context of board components and managerial ownership. Based on our study among previous research in developing markets, particularly in Malaysia, about factors which afects executives’ remuneration, the studies which considered about role of executives, especially shareholding of company is very limited as well as efect of proportion of executives in directors board. However, while we know that various factors such as ownership structure, industry type, company life cycle stage and a number of other factors afect the level of executives’ remuneration, this research focuses on the impact of executives on their remunerations. In order to understanding all aspects of executives’ efects, we have considered the impact of executives’ shareholding as well as proportion of executives on directors’ board members as main aspects. Therefore, the fnding of this study can be considered as contribution of our knowledge about role of executives in their remunerations in a developing market. Based on agency theory, shareholders prefer that new project fnanced by lender because of external monitoring and better discipline of expenditure after receiving the loan