The relationship between board driversity and executive compensation among public listed company in Malaysia

This study empirically examined the relationship between board diversity and executive compensation among public listed company in Malaysia. We extend the prior literature by covering broader dimensions of diversity such as gender, age, ethnicity, nationality, educational background and educational level diversity. A total of 312 observations was made based on selected samples by using stratified random sampling method from Bursa Malaysia from 2016 until 2018. The sample consist of non-financial listed firms from various industry sectors. This study used panel data analysis with random effect to see the relationship between the variables tested. The analysis showed that there are significant relationships between board diversity and executive compensation. The diversity of age, ethnicity and nationality diversity are significantly related to executive compensation. Moreover, some additional tests were done to see the relationship between board diversity and executive compensation, which is OLS Regression, Robust Regression and Fixed-effect Regression. OLS Regression and Robust Regression showed that there are significant relationships between nationality diversity and executive compensations, while Fixed-effect Regression showed significant relationship between ethnicity diversity and executive compensations. In conclusion, this study showed that the diversity of age, ethnicity and nationality are significantly related to the executive compensation. Future study also can add others board diversity in the study such as Political and Shariah diversity to expand the research and result on this matter. The research provides useful insight into the policy makers in setting new regulations in respect of board diversity in Malaysia and other Asian country.