The research addresses the prevalent issue of agency conflict in Malaysian PLCs, particularly in the wake of recent governance scandals that have tarnished the reputation of these companies and raised concerns about the effectiveness of the country's corporate governance mechanisms. The study is grounded in agency theory, which explores the inherent conflict between principals (investors) and agents (managers) due to information asymmetry and differing goals. Institutional investors, given their significant ownership stakes and influence, are central to mitigating this conflict. Previous research has shown their activism in improving corporate governance, but their role in Malaysia remains unclear, prompting this investigation. The study aims to determine the extent of agency conflict in Malaysian PLCs and the effectiveness of various roles (voting, monitoring, and dialogue engagement) played by institutional investors in mitigating such conflicts. The findings are crucial for understanding the effectiveness of corporate governance mechanisms in Malaysia and informing policy recommendations aimed at improving shareholder protection and reducing agency costs. The importance lies in the significant impact on shareholder value, overall market stability, and the overall health of the Malaysian economy.

The literature review examines the role of institutional investors in Malaysia, highlighting their increasing dominance in the market and their potential influence on corporate governance practices. It explores the evolution of institutional investors in Malaysia post the 1997 Asian financial crisis and how regulations such as the Malaysian Code of Corporate Governance (MCCG) and the Malaysian Code of Institutional Investors (MCII) have attempted to define and strengthen their roles. The review delves into agency theory, which explains the conflict between principals (investors) and agents (managers) due to information asymmetry and differing objectives. This conflict results in agency costs, which the study seeks to address. The literature also examines different roles institutional investors can play, such as voting rights, monitoring, and dialogue engagement, highlighting both the potential benefits and challenges of each role. The review also considers existing literature on agency conflict in Malaysia, noting the gaps in research regarding the effectiveness of institutional investor activism in mitigating such conflicts, making this study a critical contribution.

This study employs a quantitative methodology using a survey administered to corporate executives in 201 Malaysian PLCs listed on Bursa Malaysia's main market. The sampling strategy included all eleven sectors listed on Bursa Malaysia, ensuring sector diversity within the sample. The survey used a Likert scale to measure the extent of agency conflict (dependent variable) and the roles of institutional investors (independent variables: voting, monitoring, and dialogue engagement). A pilot study on 60 firms was conducted to establish the reliability and validity of the instruments. Data analysis used Statistical Package for the Social Sciences (SPSS) software, specifically Pearson correlation analysis and multiple regression analysis. The Pearson correlation examined the relationships between variables, while multiple regression assessed the independent variables' impact on the dependent variable. Reliability and validity were assessed using KMO and Bartlett's test (for factor analysis) and Cronbach's alpha (for internal consistency). The KMO value was 0.914, indicating no issues with validity, and Cronbach's Alpha showed good internal consistency (0.801 for voting, 0.929 for monitoring, 0.915 for engagement, and 0.874 for agency conflict). The methodology ensures the robustness and generalizability of findings.

The study found a high level of agency conflict (mean = 3.87) among the sampled Malaysian PLCs. Pearson correlation analysis revealed significant positive correlations between agency conflict and all three institutional investor roles: voting (r = 0.355), monitoring (r = 0.518), and dialogue engagement (r = 0.654). However, multiple regression analysis showed that only monitoring (β = 0.297, p < 0.001) and dialogue engagement (β = 0.530, p < 0.001) significantly predicted agency conflict, while voting did not (p > 0.05). This indicates that monitoring and dialogue engagement are more effective in mitigating agency conflict in Malaysian PLCs than merely exercising voting rights. The standard deviations were relatively low, implying that the data were clustered around the means, reinforcing the consistency of the findings. The findings demonstrate that while voting rights are important, active monitoring and open communication with management are crucial for effective agency conflict mitigation by institutional investors in the Malaysian context.

The findings support the hypothesis that agency conflict is prevalent in Malaysian PLCs. The significant positive relationship between monitoring and dialogue engagement, and the mitigation of agency conflict, suggests that institutional investors' active roles beyond just voting are crucial. This contrasts with some previous literature suggesting that agency conflict might be less prevalent in non-Western countries or that other types of conflict (shareholder conflict) might be more important. The study's results highlight the importance of proactive monitoring and communication as effective strategies for institutional investors to address agency problems in Malaysia. The high level of agency conflict despite ongoing regulatory reforms also underscores the need for a more assertive approach from institutional investors, going beyond compliance-based actions. The study's findings offer valuable insights for policymakers and regulators in Malaysia, emphasizing the need to create an environment that encourages active institutional investor engagement.

The study concludes that agency conflict is significant in Malaysian PLCs, and institutional investors play a crucial role in mitigating this. Monitoring and dialogue engagement, rather than voting alone, are the most effective strategies employed by institutional investors to reduce agency conflict. The findings highlight the necessity for more aggressive roles by institutional investors and greater awareness of agency issues. Future research could explore other institutional investor roles (e.g., large share transactions, pre-investment screening, proxy contests), compare findings across different countries, and investigate the impact of cultural factors on agency conflict and institutional investor behavior.

The study's limitations include focusing on only three institutional investor roles, using agency theory as the primary framework (which might not fully capture the complexities of institutional investor behavior), and using a self-reported survey which might be subject to response bias. The results may not be fully generalizable to other countries with different regulatory environments and cultural contexts. Future research should investigate the limitations mentioned and explore a broader range of institutional investor actions and contextual factors.