AAMJAF Vol 1 81104 2005ASIAN ACADEMY

AAMJAF, Vol. 1, 81–104, 2005

ASIAN ACADEMY of
MANAGEMENT JOURNAL of ACCOUNTING and FINANCE

FIRM SIZE, OWNERSHIP AND PERFORMANCE IN THE
MALAYSIAN PALM OIL INDUSTRY
Bala Ramasamy1*, Darryl Ong2 and Matthew C. H. Yeung3
1,2

Nottingham University Business School, Malaysia Campus, Jalan Broga,
Semenyih, Selangor, Malaysia
3
School of Business, The Open University of Hong Kong, 30 Good Shepherd Street,
Homantin, Kowloon, Hong Kong
*Corresponding author: [e-mail]

ABSTRACT
The objective of this study is to analyse the effects of market structure components and other performance measures to better understand the dynamics and determinants of performance within the Malaysian palm oil sector. In particular, we consider the effects of firm size and firm ownership on the level of profitability in this sector. Our findings suggest that size is negatively related to performance while privately owned plantation companies are more profitably managed. These results support the recent move by the
Malaysian government to postpone the listing of the Federal Land Development
Authority (FELDA), a government agency responsible for managing government land schemes and commercial development of plantations. It also lends support to the ongoing strategy of improving the performance of Government Linked Corporations (GLC) in
Malaysia.
Keywords: Malaysia, palm oil, privatisation, performance

INTRODUCTION
Malaysia is the world 's largest producer and exporter of palm oil, contributing almost 50% of world palm oil production in 2002 and about 58% of world exports. Malaysia has undoubtedly helped shape the status of palm oil in the global market through significant contributions and commitment to the industry.
At the same time, the growing global demand for edible oils and fats has further fuelled the Malaysian palm oil industry, which has enjoyed growth over the last
81

Bala Ramasamy, Darryl Ong & Matthew C. H. Yeung

few decades, and is undeniably an important

References: Ahuja, G. and Majumdar, S. K. (1998). An assessment of the performance of Indian state owned enterprises Amato, L. and Wilder, R. P. (1990). Firm and industry effects in industrial economics Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120. Basiron, Y. (2002). Palm oil and its global supply and demand prospects. Oil Palm Industry Economic Journal, 2(1), 1–10. Boardman, A. and Vining, A. (1989). Ownership and performance in competitive environment: A comparison of the performance of private, mixed and state Bothwell, J. L., Cooley, T. F. and Hall, T. E. (1984). A new view of the market structure – Performance debate Boubakri, N. and Cosset. J. C. (1998). The financial and operating performance of newly-privatised firms: Evidence from developing countries Finance, 53, 1081–1110. Capon, N., Farley J. V. and Hoenig, S. (1990). Determinants of financial performance: A meta-analysis Chrystal, K. A. and Lipsey, R. G. (1997). Economics for business and management Collins and Preston. (1969). Price cost margins and industry structure. Review of Economics and Statistics, 51(3), 271–87. Dalton, J. A. and Penn, D. W. (1976). The concentration profitability relationship: Is there a critical concentration ratio? Journal of Economics, Downs, A. (1967). Inside bureaucracy. Boston: Little, Brown & Co. D 'Souza, J. (1998). Privatization of telecommunication companies: An empirical analysis D 'Souza, J. and Megginson, W. L. (1999). The financial and operating performance of newly privatised firms in the 1990s Economic Planning Unit, Prime Minister 's Department of Malaysia. (1985). Gabriel, A. and Oh, E. (2003, September 20). Floating the 'promised land '. The Star: Biz Week. Galal, A., Jones, L., Tandon, P. and Vogelsang, I. (1994). Welfare consequences of selling public enterprises Gaskins, D. W. (1970). Optimal pricing by dominant firms. Unpublished Ph.D. Greene, W. H. (1995). LIMDEP version 7.0 user 's manual. Bellport, NY: Econometric Software, Inc. Hall, M. and Weiss, L. (1967). Firm size and profitability. Review of Economics and Statistics, 49, 319–331. Hannan, M. and Freeman, J. (1989). Organizational ecology. Cambridge, MA: Harvard University Press. Kessler, E. H. and Chakrabarti, A. K. (1999). Speeding up the pace of new product development Kumar, P. (1985). Growth of industrial corporation in India. New Delhi: Deep & Deep Publications, 27. LaPorta, R. and Lopez-di-Silanes, F. (1999). Benefits of privatization – Evidence from Mexico Malaysian Palm Oil Board (MPOB). (2002). Malaysian oil palm statistics 2001. . (2003). Malaysian oil palm statistics 2002. Kelana Jaya: MPOB. Marcus, M. (1969). Profitability and size of firm: Some further evidence. The Review of Economics and Statistics, 51(1), 104–109. Megginson, W. L., Nash, R. and van Randenborgh, M. (1994). The financial and operating performance of newly privatised firms: An international empirical Ming, K. K. (2001). Strategic thrust in addressing current challenges: The plantation perspective Montgomery, C. A. (1979). Diversification, market structure and firm performance: An extension of Rumelt 's model Pant, L. W. (1991). An investigation of industry and firm structural characteristics incorporate turnarounds Peteraf, M. (1993). The cornerstones of competitive advantage: A resource-based view Poensgen, O. H. and Marx, M. (1985). Coping with or profiting from size. Porter, M. (1981). The contributions of industrial organisation to strategic management Prescott, E. C. and Vischer, S. (1980). Organisation capital. Journal of Political Economy, 88, 446–461. Ramamurti, R. (1997). Testing the limits of privatization: Argentine railroads. World Development, 25, 1973–1993. Reinhard, S. (1983). A model of oligopolistic size structure and profitability. Sarkaria, M. and Shergill, G. S. (2000). Market structure and financial performance – An Indian evidence with enhanced controls Scherer, F. (1980). Industrial market structure and economic performance (2nd ed.) Scott, J. T. and Pascoe, G. (1986). Beyond firm and industry effects on profitability in imperfect markets