The Acquisition of Valuable Resources by Family-Controlled Companies in Malaysia Through Political Connections of Their Independent Directors

Many Malaysian publicly listed companies are highly dependent upon the government and ruling political parties’ patronage in order to survive and/or thrive. In fact, political involvement in the Malaysian corporate sector is so pervasive that the boundaries between business, politics and the State are often blurred. On the other hand, family‑controlled companies are highly nepotistic as they prefer hiring insiders from their closely-knit networks. This disposition limits their access to external resources. When considering the aforementioned external environment and company-owner preferences, this study argues that, political connections are more critical in family-controlled companies. Thus, the higher is the family ownership concentration, the more external linkages, networks and resources are required. With a random sample of 200 family-controlled companies listed on Bursa Malaysia in 2008, this study finds that publicly-listed companies with higher family ownership concentration do indeed appoint more independent directors who have strong connections with the government and ruling political parties and this enhances their financial performance.