Learners are required to write their discussion and views on

Learners are required to write their discussion and views on agency problems based on public listed companies in Malaysia. The discussion (including arguments) made by the students must be supported by relevant literature (books and journal articles).

Solution

Agency problems for public listed companies refer to the conflict of interest between the management of a company and its stockholders. The managers are the agents of the shareholders (the shareholders are the principals) and hence are expected to make decisions that will lead to wealth maximization of the shareholders.

The public listed companies in Malaysia have their own share of agency problems. Listed companies in Malaysia face agency costs in the form of principal monitor expenditures and residual loss. A very good example of agency problems being faced by Malaysian listed companies is that of Malaysia Perwaja Steel Project that was started in 1982. This company started at a loss of RM 2.56 billion but the actual quantum of loss finally stood at RM 10 billion. This was because of the agency problems with the project.

The ownership structure in Malaysia is concentrated and this has led to lower agency problems in Malaysia in the last two decades. When ownership is concentrated then managers have to bear a portion of the losses and this leads to alignment of the interests of the principals and the agents. This is what is happening in Malaysia since 1980.

References:

1. See, K. (August 2013). Dividend policy and agency cost in Malaysia. Retrieved from http://eprints.utar.edu.my/1099/1/FN-2013-1100799.pdf

2. Ishak, Z. (2006). Expropriation of minority interests and corporate diversification in Malaysia. Retrieved from http://web.usm.my/journal/aamjaf/vol%202-1/2-1-5.pdf