The Effects of Insider Ownership Capital Structure of Main Board Listed Companies

Abstract

In this paper, researcher tends to discuss the “internal control protects shareholders from agency problem”. The term of insider ownership refer to the shareholders who manage the company as well. In other words, the managers are also the owner of the company. Hence, the conflict of interest between the shareholders and managers will reduce as the higher on concentration insider ownership. In this study, insider  ownership expressed as the percentage of the firm’s outstanding share held by the insider. Insider ownership can be classified into outstanding share held by directors, director’s family members (e.g., spouse and siblings), board members and employees’ share option scheme committees. Family or insider groups as a significant shareholder is more likely to be interested in control benefit as well as profit and decision making (Teall, 2007). Small firms usually are higher in insider ownership than outsider control. When a firm expands the business through public listing, the ownership will distribute ownership opportunity to the public. In Malaysia, when go to public listing, the 30% shares must hold by bumiputra. If there are non-bumiputra companies, the companies will gather 30% shares from outsiders who are bumiputra to meet the listing requirement.