Testing the short-termism hypothesis:Institutional investors,family control,and capital spending in Malaysia

We have examined whether institutional ownership and family control in Malaysia are linked to capital spending.Using panel data from 220 listed companies in Malaysia,we showed that institutional ownership is positively associated with capital expenditure(CAPEX).Consistent with institutional investors’monitoring role in corporate governance,the results indicate that this relationship was driven by the presence of growth opportunities.However,we found that family control was negatively associated with CAPEX.Additional analyses showed that this relationship was moderated by company size.While larger family firms invest less in CAPEX,smaller family firms invest more in CAPEX,indicating that the benefits of lower agency conflicts in family firms hold only for smaller firms.Our results are robust to alternative empirical measurements that account for firm characteristics and the endogeneity of institutional shareholding.