The behaviour of individual investors in Malaysia: a governance perspective

Yeoh, Ken (2010) The behaviour of individual investors in Malaysia: a governance perspective. Doctoral thesis, Northumbria University.

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Abstract

Despite the many benefits that good governance brings to investors, academics contend that individual investors have no significant role to play in governance as it is economically unviable and too time consuming for them. On the other hand, regulators encourage and seem to expect individual investors to be governance interested, especially in exercising their ownership rights and making use of governance redress mechanisms whenever the need arises. Are such expectations of how these investors should behave at all reasonable? More importantly, there is anecdotal real-life evidence that at least some individual shareholders in Malaysia do play a role in governance such as attending AGMs. If, as assumed by academics that it is not viable for them to do so, what is the logic and/or motivations behind such observed behavioural tendencies? This study explores the many possible ways by which investors take governance into account (including harder-to-observe treatments – e.g. governance featuring in the form of share investment evaluation criteria). Yet unidentified, important actual motivations and justifications for all reported governance-related tendencies are studied as well. The actual relevance and also prevalence of such treatments and reasonings are largely unexplored in the empirical literature. Essentially, the study considers all governance-related attributes (both firm-level and country-level) that are potentially important to individual investors as well as all governance-related actions/tendencies exhibited by them throughout the typical share investment cycle. Each action/tendency is viewed and made sense of (i) as an integrated part of the sets of behaviours identified, (ii) within the governance environment and investment context where it takes place and (iii) from the standpoint of individual investors. Individual investors‘ relative propensities toward considering governance and/or undertaking governance-related actions are found to be (i) affected by, and are thus rational responses to, the governance-related institutional, environmental, cultural constraints they face and (ii) influenced by their personal investment inclinations, stylistics and preferences such as their primary investment strategies. These entail a number of implications that inform both policy and practice.

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