H1-1 : The shareholding ratio of external institutional investors positively affects business performance.
Family business owners typically offer huge profits to in-group members, the board, and managers, to ensure that they not leave the family business. The incentive is higher than their contribution (Yen, 1996).Masulis, Wang and Xie (2012) determined that firms with foreign independent directors (FIDs) display poorer board meeting attendance records and higher CEO compensation, and exhibit significantly poorer performance, than firms without FIDs. Efficiency monitoring from outside a community of interest affects manager compensation. Therefore, when the shareholding of external institutional investors increase, firm value and manager compensation increase.
H1-2 : The shareholding ratio of external institutional investors positively affects the compensation of managers.