The numbers of cases regarding corporate scandal, fraud and so on have been the major reasons for this study to emphasis on the roles of institutional investors. In order to improve corporate governance practices by the companies, one of the main issues is to control or minimize agency conflict. In this study, the theory of agency is applied between the institutional investors which refer as principal and the management of public listed companies as the agent. As the large investors who hold largest shareholding in public listed companies, the institutional investors have been seen as the ‘mechanism’ to improve corporate governance .This study focuses on the roles of institutional investors to control agency conflict. The purpose of this study is to examine the level of agency conflict among public listed companies particularly in Malaysia. The study also examines the relationship between the roles of institutional investors (voting, monitoring and engagement) and agency conflict. In addition, the study also intended to identify which of the three roles of institutional investors that significantly influence agency conflict.
The respondents for this study were from 201 public listed companies that listed in Main Market. The method of data collection in this study is by using questionnaire that were given to the key person of listed companies such as CEO, directors, company secretaries and investor relation officers. It was found that the level of agency conflict among public listed companies is high. The results also indicated that monitoring role and engagement role have significant relationship to control agency conflict. Among the three roles of institutional investors, engagement role was the most significant role which influences agency conflict. In addition, it was found that the voting role of institutional investors has no significant influence to control agency conflict. In short, the roles of institutional investors have become significant in order to promote good corporate governance in Malaysia.
