1

Centre for Finance Working Paper Series

Working paper 2009 002

Changes in Malaysia: Have Political Connections Lost Their Value?

Heather Mitchell and Saramma Thomas Abstract During the 1997 Asian currency crisis and resulting imposition of capital controls in

Malaysia, evidence from previous studies shows that firms with political connections

suffered more during the crisis but benefited more when capital controls were

introduced. In the period since then, the evidence shows very little significant

difference in performance between firms with political connections and those without.

This period not only includes the relaxation of capital controls but also the resignation

of Tun Dr Mahathir Mohamad as prime minister and the handover of control to Datuk

Seri Abdullah Ahmad Badawi.

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1. Introduction

On the 1st September 1998 the Prime Minister of Malaysia, Tun Dr Mahathir

Mohamad, surprised financial markets by introducing a raft of capital control

measures. This was done against the advice of the Malaysian central bank and was

unlike approaches taken by Korea, Indonesia and Thailand. It was also contrary to

pronouncements by the Deputy Prime Minister and Finance Minister Datuk Seri

Anwar Ibrahim, who was dismissed the following day and later jailed on charges of

corruption and sexual misconduct.

The official reason given for the capital controls was that the panic caused by the

Asian financial crisis was creating severe problems for Malaysia, which would be

stabilised by restricting the free flow of funds. Malaysia’s acting central bank

governor, Zeti Akhtar Aziz said these measures were required to “minimise the impact

of a possible economic crisis and a breakdown in the international financial system”1.

This reasoning is supported by Krugman (1998), who argued that capital controls

should be used to stabilise economies during the currency crisis, even at the risk of

increasing corruption and cronyism.

Many studies have examined the introduction of these controls, both on Malaysia’s

economic recovery and on firm performance. In this study we consider the impact of

the removal of these controls on firm performance as well as the changes in political

leadership. In particular we look at differences in firms’ performance based on their

1 Quoted in the International Herald Tribune by Fuller (1998).

3

connections to government. We examine both firms with “crony” type connections

and those owned in part or whole by the government.

In their 2003 study Johnson and Mitton examined the performance of individual

Malaysian firms over the crisis period, and compared the performance of firms with

political connections to those without. They also compared the performance of firms

connected with Mahathir with those connected with Anwar. This showed that

strongly politically connected firms suffered more at the beginning of the crisis, when

government subsidies were reduced. After capital controls were introduced firms

with good political connections increased relatively more in value. “The evidence

suggests Malaysian capital controls provided a screen behind which favoured firms

could be supported.2” They found that 32% of the increase in firms’ value could be

attributed to their political connections.

Faccio, Masulis and McConnell (2006) examined the relationship between political

connections and corporate bailouts by governments using a cross-country study with

data from 1997 to 2002. They found that of the 51 bailouts of politically connected

firms, 17 happened in Malaysia while only three of the 20 non-connected bailouts did.

This discrepancy was so large the authors felt obliged to re-estimate their models

without Malaysia, in case this was driving their results. They found that political

connections significantly increased the probability of a firm receiving a government

bailout. They also found that, of the firms that did receive bailouts, the unconnected

firms were performing significantly better than the connected firms after two years.

This adds weight to Jonson and Mitton’s (2003) finding that political connections in

Malaysia added value to firms.

2 Johnson and Mitton (2003) p351 abstract

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The connection between capital controls and cronyism has been made by other

studies. Rajan and Zingales (1998) contend that without transparency and a strong

legal contract system, relationship based financial systems are likely to be preferred to

arms length systems. They argue that if a free capital market exists with the

relationship based system, overseas investors will be unwilling to invest long term

because of the lack of transparency, increasing the risk of a financial crisis.

Rodrik and Kaplan (2001) argue that the Malaysian recovery was better than it would

have been without the capital controls, by comparing its recovery with those countries

that followed the conventional IMF approach in the region. They also claim that the

flow of funds out of Malaysia would have increased dramatically after the sacking of

Anwar had the controls not been in place.

Choudry (2005) examined the betas of ten Malaysian stocks and ten Taiwanese stocks

for time variation and found significant variation in the betas over the crisis period.

Three of the Malaysian stocks had political connections. He found differences in

behaviour between the different stocks but the sample was too small to make any

generalisations.

In the finance industry, Chong, Liu and Tan (2006) showed there was considerable

evidence of cronyism in the program of forced mergers instituted by the government.

This was evident in the selection of acquiring and target banks and it was found that

the mergers overall destroyed aggregate economic value.

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Since the introduction of capital controls there have been major political changes in

Malaysia, the most important being the resignation of Dr Mahathir and his

replacement by Datuk Abdullah Ahmad Badawi on 31st October 2003. Johnson and

Mitton (2003) name Mahathir as being a primary political connection to twelve firms

based on the book by Gomez and Jomo (1997). In contrast Badawi is not named in

connection with any firm. In fact the only reference to him at all in the Gomez and

Jomo work was to claim he had been discriminated against by media companies

politically connected to Anwar. More recently though there has been some implied

connections through his son-in-law Khairy Jamaluddin.3 In late 2005 Jamaluddin was

sold approximately 13 million shares in ECM Libra Avenue at a discounted price. He

later “voluntarily” divested himself of the shares at a loss of around 200,000 RM.

The capital controls have been gradually reduced and the exchange rate was peg was

removed on 21st July 2005. In the following section we look at the changes that have

occurred in Malaysia since the currency controls were introduced and discuss their

likely effect on firm performance. We consider both the relaxation of the currency

controls and the change in political leadership, both of which are likely to

disadvantage politically connected firms. In section 3 the data is described and in

section 4 the results of the analysis are presented. The final section gives the

conclusions.

2. Changes in Malaysia

Our study starts one month after the introduction of the capital control measures on

the 1st September 1998. These measures pegged the Malaysian ringgit to the US

3 Jamaluddin had previously been in a relationship with Anwar’s daughter, but the relationship ended

with Anwar’s fall from power.

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dollar at a rate of RM3.80 to one US dollar. Portfolio investors were restricted from

repatriating funds invested in Malaysia until 1st September 1999. Offshore trading of

ringgit was not permitted and the ringgit was no longer legal tender outside Malaysia.

This resulted in the downgrading of Malaysia’s sovereign debt ratings by international

credit rating agencies. Major international agencies including Dow-Jones, the

International Finance Corporation (IFC) and Morgan Stanley removed Malaysia from

their investment benchmarks.

The first period we consider in this study is from the 1st October 1998 to the 30

th

September 2000. We call this the restructuring period and is the last period

considered by Johnson and Mitton (2003)4. The period saw a decrease in controls on

capital movement but forced mergers among financial firms.

During the restructuring period capital controls on portfolio outflows were eased

following increasing economic stability. In February 1999, the 12 month holding

period restriction on portfolio investment repatriation was replaced by a two-tier exit

levy. On 21st September 1999, the graduated exit levy was eliminated in favour of a

uniform tax of 10 percent on profit repatriated. As a result Malaysia’s sovereign

ratings were upgraded at the end of 1999. Malaysia was reinstated in the Dow-Jones

Investment indices and the IFC indices in November 1999 and later the MSCI in May

2000.

In this same period a forced merger scheme for financial institutions was introduced.

When this was first announced by the Malaysian central bank, Bank Negara Malaysia,

4 Although the period is the same, our sample of firms is different as Johnson and Mitton used the

Worldscope database while we are using DataStream.

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on 29th

July 1999 six anchor banking groups were proposed and the mergers were

required to be completed by the end of 1999. After strong protests the number of

groups was increased to ten, from the existing 54 domestic banking institutions,

institutions were given until the end of January 2000 to find partners and the merger

agreements were concluded by August 2000.

This leads us to our first two hypotheses:

Hypothesis 1: For non-financial firms, politically favoured firms should

underperform outsiders as the shield provided by the capital controls is reduced

during this period.

Hypothesis 2: Politically favoured financial firms should outperform others as they

are more likely to benefit from the forced mergers during this period.

Our second period starts on 1st October 2000, the end of the Johnson and Mitton

(2003) study and ends on the 21st June 2002, the day before Mahathir’s resignation

speech. We call this the consolidation period and there were few major changes

during this time. In February 2001, the 10 percent exit levy for portfolio capital

profits repatriated after 12 months was abolished and on 2nd

May 2001 it was

completely removed. Our next hypothesis then is:

Hypothesis 3: There is no significant difference in performance between politically

favoured firms and others during the consolidation period.

The third period, which we call the transition period starts on the 22nd

June 2002 the

day of Mahathir’s resignation announcement and ends on 30th October 2003, the last

day of his prime ministership. Mahathir unexpectedly announced his resignation at

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the UMNO General Assembly. His party members persuaded him to stay for another

18 months to enable a planned handover to his deputy Badawi on 31st October 2003.

After 22 years in office, he was awarded the highest honour (in Malaysia) “Tun”. As

this news was genuinely unexpected and ended a stable period of government we

propose the following hypotheses:

Hypothesis 4: Firms with no political connections will show a decrease in

performance over this period.

Hypothesis 5: Firms with a connection to Anwar will not be as adversely affected as

other firms.

Hypothesis 6: Firms with a connection to Mahathir will show a larger decrease than

average.

We have data on 16 firms with connections to Anwar but only on four firms with

specific connections to Mahathir so we cannot reliably estimate the effect of this

connection. As a result Hypothesis 6 has been modified to:

Hypothesis 6a: Firms with an unofficial political connection which does not include

Anwar will show a larger decrease than average.

As the markets were likely to be reassured by the gradual 18 month handover, instead

of the immediate resignation that was originally proposed, we will consider the first

month of this period separately.

The next period from the 31st of October 2003 until the 21

st July 2005 starts with the

handover of power to Badawi and ends with the removal of the currency peg. We call

this the resolution period. Badawi was appointed Deputy Prime Minister in 1998.

Upon becoming Prime Minister he promised to tackle corruption. Anti-Corruption

agencies have been given more power. Several public figures from the Mahathir era

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have been arrested for corruption. Although Badawi won his rival Anwar’s job, he did

not interfere with the Federal Court’s decision to overturn the conviction for sodomy

and consequent release from prison in September 2004.

In 1988 three government institutions were set up to help stabilise the financial sector.

All ceased operations around this time. The Corporate Debt Restructuring Committee

(CDRC) was set up to provide a platform for both borrowers and creditors to work out

feasible debt restructuring schemes without having to resort to legal proceedings. It

resolved 48 debt cases amounting to RM52.6 billion. This formed 65% of the cases it

undertook. It ceased operations on August 15, 2002 (Bank Negara Malaysia 2002).

Danamodal recapitalised banks. It provided funds of RM7.6 billion to ten banking

institutions. From this RM6.6 billion was recovered in 2003. The balance of RM1

billion in one institution was divested in 2004 (Bank Negara Malaysia 2004). Finally

Danaharta discounted and bought bad loans from banks. It acquired RM50 billion in

loans and was able to recover 59% of the loans acquired by December 2005 when it

ceased operations. These and the removal of the currency peg completed the removal

of the emergency measures put in place during the Asian financial crisis.

Because of the removal of these measures and the attempts to reduce corruption, we

would expect the value of political connections to decline over this period. As most

of the assistance measures that ended during this period assisted banks, we would

expect financial firms to be more adversely effected. This leads to our next

hypothesis:

Hypothesis 7: Politically favoured firms should underperform others during the

resolution period, with financial firms performing worse than others.

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The final period starts on the 22nd

July 2005 and ends on 30th

June 2006. It is

included primarily for comparison. Although Mahathir held no official position in the

government, he was still active. He was an adviser to Petronas (National Oil

Company) and Proton (The National Car Company). He also commented on political

events, notably on the 7th

June 2006 he criticised the present Prime Minister and the

government’s decision to scrap the Johor-Singapore causeway replacement (Sujata,

2006) however his position did not receive the usual press support it would have

while he was prime minister. His influence seems to have declined as the new

leadership has consolidated its power and tends to ignore his pronouncements. This is

unlike the situation in some other countries, notably Singapore, where the retired

leader still wielded considerable influence. Our final hypothesis is:

Hypothesis 8: There is no significant difference in performance between politically

favoured firms and others during the final period.

Hypothesis 9: Firms with unofficial political connections with be more strongly

affected by these events during the restructuring, resignation and resolution periods

than Government Linked Companies or Khazanah firms.

With the exception of the resignation of Mahathir and possibly the exact date of the

lifting of the currency peg, the changes discussed above were gradual and well

anticipated by the market. As a result we do not expect to see the same dramatic

changes in value found by Johnson and Mitton (2003) after the imposition of currency

controls.

3. Data

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We use data on 625 firms that are listed on the KLSE main board5 and have data

available on DataStream. Data on all firms is not available for the whole period. We

calculate monthly returns, inclusive of dividends, based on Malaysian ringgit. We use

raw returns rather than risk adjusted because we would need to use betas calculated

during the crisis period, which are likely to be highly variable during the crisis period

and unlikely to be representative of post-crisis behaviour. This is confirmed by

Choudry (2005) who found evidence of time variation of betas over the crisis period

in a sample of Malaysian stocks. To compensate for this use of raw returns we use

firm specific factors such as firm size, leverage and industry type as control variables

in the regressions. In this, and the selection of firm specific factors, we follow

Johnson and Mitton (2003).

Over the period of this study we would expect firms connected to Mahathir and his

associates to perform less well, both through loss of political patronage and because

of the reduction of the screen provided by capital controls. To determine which firms

have unofficial or “crony” type connections we use the list from Johnson and Mitton

(2003). These are given in the appendix. These connections are based on personal

relationships often developed with rising politicians were not determined by the

nature of the firm. Such connections had already lasted many years before the 2003

study and can be expected to be largely in place, with the possible exception of

Anwar-connected firms. Johnson and Mitton (2003, p 354) state that in 1999,

“Anwar-connected firms were either taken over by Mahathir-connected firms or their

owners switched allegiance to Mahathir.” For this reason we treat these firms as a

5 Second board firms are not used as information on political connections is not available for the firms

provided by DataStream.

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single class, however we look at possible differences in performance depending on

their connections during the period immediately following Mahathir’s resignation.

As well as comparing these with politically unconnected firms, we also compare these

to the official “Government Linked Companies” (GLC). “GLCs are defined as

companies that have a primary commercial objective and in which the Malaysian

Government has a direct controlling stake. Controlling stake refers to the

Government’s ability (not just percentage ownership) to appoint BOD members,

senior management, make major decisions (e.g contract awards, strategy,

restructuring and financing, acquisitions and divestments etc. ) directly or through

GLICs”6. Khazanah Nasional Berhad

7 is the national government’s investment arm

and has shareholdings in many of these companies. We would expect both these

types of firms to benefit more than those with an unofficial political connection or no

connection as the government could claim a public interest in preferential treatment of

these firms.

All financial variables are measured in ringgit. Firm size is measured using the

natural log of total assets and growth is the percentage growth in total assets in the

previous year. Return on assets is net income (for financial firms) or net sales (for

non-financials) divided by total assets. Profit margin is net sales or net revenues

divided by operating income in percentages. The current ratio is measured as current

6 http:// www.khazanah.com.my/faq.htm#ques6 accessed 4

th September 2006.

7 Khazanah Nasional Berhad is the government’s investment arm and was incorporated as a public

limited company on 3rd

September 1993 commencing operations a year later. The Minister of Finance

owns all shares, except for one owned by the Public Land Commissioner. (Information from company

website)

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assets divided by current debt and the quick ratio as cash and equivalents plus

receivables divided by current debt. Assets turnover is net sales divided by total

assets and inventory turnover is net sales divided by total inventory. Leverage, or the

debt ratio, is measured as the ratio of total debt to total assets and short term debt is all

debt with a maturity of less than one year. Book to market ratio is the book value of

the share divided by the market value. All variables are constructed using data from

the DataStream database.

For the industry dummy variables included in the regressions, we used the twelve

classifications provided on the KLSE website, but some categories were merged

because of the small number of firms which had data available. For at least some of

the periods data was only available for one or two firms, making the use of an

industry dummy impossible or at least very inefficient. Mining was merged with

construction, real estate with property and hotels, infrastructure and technology with

services.

Firms’ political connections have been classified using three different criteria. The

first are those firms having unofficial political connections, based on the work of

Gomez and Jumo (1997) and the other two groups have formal government

connections. The first of these are Khazanah (KNB) firms, which have some degree

of government ownership. The second are government-linked firms (GLCs), which

have a formal acknowledged relationship with government. As part of this

relationship they offer economic advice to government through round table

discussions and agree to undertake activities considered to be in the public interest.

There is a degree of overlap between the three groups. The largest is between GLC

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and KNB firms, with seven of the twenty GLC firms also being KNB. In the analysis

that follows we consider the three groups separately. A list of connected firms and

their type of relationship is given in the appendix.

4. Results

Table 1 shows the result of the preliminary analysis. We consider returns on the

companies over the five different periods and look at the financial variables at the

start and end of the period.

(Insert Table 1 about here)

The first panel the returns in each of the periods. These are generally consistent with

the returns on the KLSE price index except for the resolution period where the index

shows a small positive return. Unlike the KLSE price index, which is weighted by

market capitalisation, our return is an unweighted average, which would account for

the difference.

The results from the first restructuring period are consistent with the corresponding

period from Johnson and Mitton (2003), in that both connected and unconnected firms

have large positive returns and there is no significant difference between returns for

the two sets of firms.

In the following consolidation period we hypothesised there should be no significant

differences between politically favoured firms and others. This is supported for the

informal connections and GLCs. During this time Khazanah firms have significantly

higher average returns than non-Khazanah firms, with the former firms having

positive returns while the later had negative returns on average.

15

During the first month of the resignation period all groups of firms have negative

returns. We find that GLC firms are more badly affected than non-GLCs during the

first month, but over the whole of the resignation period there is no significant

difference. The informal political connections and Khazanah firms show no

significant difference in the first month, but they are marginally outperformed by the

unconnected firms over the whole period.

The returns in the resolution period do not support the hypothesis that politically

connected firms underperform during this period. The only significant difference

shows GLCs outperforming unconnected firms, contrary to expectations.

In the final period we see firms with informal political connections outperforming

those without, again contrary to our hypothesis. There are no significant differences

between the firms with formal connections and those without.

On examining the second panel of Table 1, which give the financial figures, we find

that the connected firms are much larger than the unconnected ones, regardless of the

nature of the connection. The growth rates for the firms with unofficial political

connections are smaller than those without. These findings are similar to those

Johnson and Mitton (2003) found at the start of their study period. In contrast we find

that firms with government ownership (Khazanah) are growing more quickly than

non-Khazanah and there is no significant difference in the growth rates of GLCs and

others.

16

We find that firms with unofficial political connections are less profitable and there is

some evidence this applies to Khazanah firms, though GLCs are more profitable. In

all cases the connected firms are less liquid than the unconnected ones. The results

for the asset utilisation, or efficiency, measures are mixed. There is some evidence

that firms with unofficial connections are more efficient and strong evidence that

GLCs are less efficient. The unofficially connected firms and Khanazah firms are

more highly leveraged than others and their leverage is increasing more quickly, but

there is no significant difference for GLCs. In all cases the ratio of short term to long

term debt is higher for the unconnected firms but the increases are higher for

unofficial connections and lower for Khazanah firms. The book-to-market ratios are

below one for all groups of firms8, suggesting they are overvalued relative to book

value. There are no significant differences between groups of firms.

To determine if the differences noted above result from underlying differences

between the connected and unconnected firms or can be explained by factors such as

size or industry sector the regressions given in Table 2 were estimated. In this and all

following regression models we use White heteroskedasticity adjusted standard errors

and t-statistics.

(Insert Table 2 about here)

We control for industry factors using industry dummy variables and size using the

natural log of total assets. We measure profitability using return on assets (ROA) and

estimate the following model:

8 These are significantly less than one for all firms except those with unofficial political connections.

Test statistics are not reported here but are available from the authors on request.

17

∑=

+ +++++++=81

,5543210 )ln(toj

iijjiiiiii eIDGrowthTAKNBGLCJMROA βββββββ

(1)

Here JM, GLC and KNB are dummy variables for the three types of political

connection, TA is total assets and the IDs are the industry dummy variables. The

model for leverage is

iiiiiii ROAGrowthTAKNBGLCJMLEV 6543210 )ln( βββββββ ++++++=

∑=

+ ++81

,6

toj

iijj eIDβ . (2)

Leverage is measured using total debt divided by total assets. Regression models

using the same explanatory variables as equation (2) are estimated for liquidity, using

the current ratio as the dependent variable, and efficiency, using the inventory

turnover ratio as the dependent. As financial firms are expected to behave differently

to others, wherever sufficient data are available, models are estimated separately for

financial and non-financial firms.

None of the dummy variables for the unofficial connections or the GLCs are

significant in any of the regressions. This shows that these firms did not perform

significantly differently at the start of our study period. The results are different for

the non-financial government owned firms. These have higher leverage, lower

profitability and lower liquidity even after firm size and industry factors are taken into

account. As a result any differences between these Khazanah firms and others in the

following analysis cannot be confidently attributed to their political connection.

In Tables 3 to 7 we estimate models to assess the impact of political connection over

the different periods, using the following equation:

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∑=

+ +++++++=81

,5543210 )ln(toj

iijjiiiiii eIDLEVTAKNBGLCJMRET βββββββ .

(3)

For the regressions for financial firms we do not include the GLC or KNB dummies as

there are insufficient financial firms in these categories. We also run regressions

using a single dummy variable which is one for firms that have any type of political

connection.

Table 3 gives the results for the restriction period immediately after the imposition of

currency controls. It shows no difference in performance between connected and

unconnected firms. Johnson and Mitton (2003) found evidence that their connected

firms had significantly higher returns than average in the month immediately

following the imposition of capital controls, September 1998. Our estimation period

starts in October 1998 and finds no evidence of either higher or lower returns for

these firms. This suggests that though there was a one-off increase in the value of

these firms, they have not out performed unconnected firms on a continuing basis, but

neither have they lost that increase.

(Insert Table 3 about here)

We had hypothesised that politically connected non-financial firms should

underperform others during this period and financial firms should outperform others.

Neither of these hypotheses is supported by the regressions as none of the politically

connected dummy variables are significant in any of the regressions.

(Insert Table 4 about here)

19

The results for the consolidation period leading up to Mahathir’s resignation are given

in Table 4. We hypothesised that there would be no significant difference in firm

performance between connected and unconnected firms. This is supported for non-

financial firms, but not for the finance firms, which show a decrease in performance

in Panel A. The results in Panel B show the effect of the particular connection type.

Unfortunately there are so few GLC or Khazanah financial firms that dummy

variables could not be used for these. When the unofficial political connections only

are considered there is no significant difference in performance. The GLC firms

show no significant difference in performance when the financials are excluded, but

do perform worse when they are included. The Khazanah firms perform slightly

worse when the financials are included than when they are excluded, but the

difference is not significant. This suggests the significant negative result is driven by

the four large GLC financial companies9. Surprisingly we find that the Khazanah

non-financial firms outperform the others.

(Insert Table 5 about here)

For the resignation period results in Table 5, we have included dummy variables for

non-Anwar and Anwar connected firms. A firm is classified as Anwar if one of the

connections listed in the appendix is Anwar. If a firm has an unofficial political

connection that does not include Anwar, it is designated as non-Anwar. Although it is

believed that most Anwar connected firms realigned themselves after his fall, it is

possible that some taint of the connection remains which is most likely to show with

the resignation of Mahathir. A separate analysis was carried out for the first month of

this period as this was when Mahathir announced his shock resignation.

9 These are Affin Holdings, BIMB Holdings, Malayan Banking and Malaysia Building Society.

20

In the first part of this table we find that non-finance GLCs underperform all other

firms when the whole period is considered. This is the only variable that affects

returns. Even the control variables of firm size and leverage, which are generally

significant in the other regressions, have no significant impact here.

The second part of the table gives the results for the first month only. In all the

regressions the intercept is negative but only significant for the non-finance firms,

which does provide support for Hypothesis 4, that firms will underperform during this

period. Again GLC firms underperform the other firms. The non-Anwar coefficients

are not significant, indicating that Hypothesis 6a, that firms with political connection

that do not include Anwar will be more adversely effected than other firms is not

supported. There is some evidence to support Hypothesis 5, that Anwar firms will be

less adversely affected. The coefficient for the Anwar dummy variable is marginally

significant for the model including all firms. By comparing the results for the non-

finance and finance firms, it is clear this result is driven by the finance firms, which

has a very large and significant positive coefficient, while the non-finance firms is

positive, but relatively small and insignificant. This result needs to be treated with

caution though, as there are only three finance firms with Anwar connections.

(Insert Table 6 about here)

For the penultimate period given in Table 6 we hypothesised that firms with unofficial

political connections should underperform others, with financial firms faring even

more badly. The coefficient for the non-financial firms, while negative, is not

significant. That for the financial firms is both negative and significant, giving partial

support to our hypothesis.

(Insert Table 7 about here)

21

In the last period we had hypothesised that there should be no difference in firm

performance for the different classes of firms. The results in Table 7 show this to be

the case, with none of the connection dummy variables being significantly different

from zero.

5. Conclusions

In their 2003 study Johnson and Mitton found evidence that politically favoured firms

outperformed unconnected firms in the period immediately after the imposition of

capital controls. In this study we consider not only firms with unofficial crony

connections, but also firms with official links to government, Government Linked

Companies, and firms with some portion of government ownership, Khazanah firms.

We find little evidence that firms with any type of political connections either

underperform or outperform unconnected firms in the extended period during which

capital controls were introduced, or during the change of leadership from Mahathir to

Badawi.

One result showed that politically connected financial firms outperformed all others

during the period immediately following Mahathir’s resignation. This result was

driven by three firms which had connections to Anwar. This suggests that these firms

expected to be treated less unfavourably under a change of leadership, but the sample

is too small for confidence.

Khazanah firms perform differently to other groupings. They were less profitable,

less liquid and more highly leveraged, even after factors such as firm size and

22

industry sector were taken into account. Despite this they outperform other firms

during the consolidation period.

A further significant result was that politically favoured financial firms

underperformed others during the second last period, when the institutions set up to

assist banks were wound up.

Our study shows very little value in any sort of political connection once the

immediate effect of the introduction of capital controls had dissipated, which seems to

have occurred after one month. Any effects that did remain were confined to the

finance industry. The value of crony connections was no longer evident and this

effect was apparent even before Mahathir left office.

Acknowledgments:

The authors would like to thank Prof Richard Heaney and an anonymous referee,

whose comments have greatly improved this paper.

23

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Fuller, T., 1998. Malaysia clamps down on currency trading, International Herald

Tribune 2nd

September

Gomez, E.T., Jumo, K.S., 1997. Malaysia’s political economy: Politics, patronage and

profits, First Edition, Cambridge University Press, Cambridge.

Johnson, S., Mitton, T., 2003. Cronyism and capital controls: evidence from

Malaysia, Journal of Financial Economics 67, 351-382.

Kaplan E., Rodrik D., 2002. Did the Malaysian capital controls work?, in: Edwards,

S., Frankel, J.A. (Eds), Preventing currency crises in emerging markets, University of

Chicago Press. pp. 393-440.

24

Khazanah Nasional, 2006. Portfolio companies, http://www.khazanah.com.my,

(accessed 4th September 2006).

Krugman, P., 1998. Saving Asia: it’s time to get radical, Fortune 138 (5), 7th

September, 74-80.

Rajan, R., Zingales, L., 1998. Which capitalism? Lessons from the East Asian crisis,

Journal of Applied Corporate Finance 11, 40-48.

Sujata, V.P., 2006. Dr M slams Pak Lah but BN leaders rally behind the PM, The Star

(Malaysia) 8th

June

Tourres, M., 2003. The tragedy that didn’t happen: Malaysia’s crisis management and

capital controls, Institute of Strategic and International Studies, Malaysia.

Transformation Management Office, 2006. GLC transformation program on track,

initiatives now in implementation stage,

http://pcg.gov.my/PDF/TMO_Press%20Release%20for%20PCG10_21Jul06.pdf

(accessed 27th

September 2006).

25

Table 1: Statistics and Ratio Analysis Prob is p-value for t-tests for the difference between means of the two groups. The values of the financial variables and growth rates are measured in 1998.

TA is total assets, RM is Malaysian ringgit, ROA is return on assets, PM is profit margin, CR is current ratio, QR is quick ratio, ATR is asset turnover ratio,

ITR is inventory turnover ratio, TD is total debt and STD is short term debt.

Firm

Type

All Johnson and Mitton Connection Khanazah Government Linked Company

Part I: Average Monthly Percentage Returns

Sample

period

n %ret n Yes n No Prob n Yes n No Prob n Yes n No Prob

Oct 98

Sept 00

453 2.236 52 1.723 401 2.302 0.129 18 2.183 435 2.238 0.913 17 2.389 436 2.230 0.691

Oct 00

21 Jun 02

483 -0.502 52 -0.776 431 -0.469 0.422 21 0.290 462 -0.538 0.048 18 -0.215 465 -0.514 0.516

22 Jun 02

Oct 03

525 0.700 52 0.034 473 0.773 0.083 23 -0.147 502 0.739 0.067 19 0.070 506 0.723 0.114

22 Jun 02

22 Jul 02

525 -2.262 52 -0.384 473 -2.463 0.144 22 -3.696 494 -2.198 0.404 18 -5.365 498 -2.149 0.034

Nov 03

21 Jul 05

568 -1.202 52 -1.617 516 -1.160 0.251 25 -0.394 543 -1.240 0.125 19 -0.068 549 -1.242 0.022

22 Jul 05

Jun 06

609 -0.323 52 0.459 557 -0.396 0.044 25 0.194 584 -0.345 0.404 19 0.484 590 -0.349 0.156

26

Table 1 (continued): Statistics and Ratio Analysis

Firm

Type

All Johnson and Mitton Connection Khazanah Government Linked Company

Part II: Financial Variables at Start of Study Period

Variable n value n Yes n No Prob n Yes n No Prob n Yes n No Prob

(A) Size and Growth

TA

RM1000

337 2920 50 4659 287 2617 0.000 16 9984 321 2568 0.000 15 18695 322 2185 0.000

TA

growth %

329 4.55 49 0.43 280 5.27 0.000 16 10.04 280 4.27 0.000 14 3.95 315 4.57 0.730

(B) Profitability

ROA % 318 -1.02 46 -4.64 272 -0.40 0.000 16 -5.76 302 0.63 0.000 15 -0.16 303 -1.06 0.001

PM % 318 4.00 46 -6.81 272 5.83 0.000 16 6.63 302 5.15 0.209 15 6.67 303 3.87 0.000

(C) Liquidity

CR 248 1.65 35 1.14 213 1.74 0.000 14 0.84 234 1.70 0.000 10 1.10 238 1.68 0.000

QR 248 1.21 35 0.85 213 1.27 0.000 14 0.68 234 1.24 0.000 10 0.79 238 1.23 0.000

(D) Asset Utilisation

ATR % 336 42.5 50 42.6 286 42.5 0.931 16 36.9 320 42.8 0.005 15 33.3 321 42.9 0.000

ITR 292 15.2 41 19.4 251 14.5 0.000 14 21.1 278 14.9 0.088 13 5.3 279 15.6 0.000

(E) Leverage

TD/TA 337 28.2 50 46.1 287 25.0 0.000 16 41.5 321 27.5 0.000 15 29.2 322 28.1 0.374

STD/TD 294 62.1 44 58.6 250 62.7 0.000 16 53.1 278 62.6 0.000 15 54.1 279 62.5 0.000

Increase

in TD/TA

329 3.8 49 10.3 280 2.7 0.000 16 8.6 313 3.6 0.000 14 3.4 315 3.9 0.359

Increase

STD/TD

282 1.7 42 5.9 240 1.0 0.000 16 -1.7 266 2.0 0.009 14 1.6 268 1.8 0.886

(F) Book to Market Ratio

336 0.743 48 0.923 288 0.713 0.348 16 0.721 320 0.744 0.869 15 0.688 321 0.745 0.687

27

Table 2: Political connectedness and firm characteristics for restructuring period. The restructuring period starts in October 1998, shortly after the introduction of capital controls, and ends in September 2000. Profitability is measured by

return on assets, debt ratio by total debt divided by total assets, firm size by the natural log of total assets and firm growth by percentage increase in total

assets. Figures for firm size, growth and profitability are measured in the previous year. As figures for current ratios are only available for four finance firms

and inventory figures for five, regressions were not possible for the liquidity and efficiency regressions for financial firms separately. Industry dummy

variables were also estimated but the results are not reported. Figures in parentheses are White heteroskedasticity adjusted t-statistics. The symbol* indicates

significance at 10%,**

at 5% and ***

at 1%

Panel A: Profitability Panel B: Leverage Panel C: Liquidity Panel D: Efficiency

Dependent variable is return on

assets

Dependent variable is debt

ratio

Dependent variable

is current ratio

Dependent variable is

inventory turnover ratio

Firm type Non-

finance

Finance All Non-

finance

Finance All Non-

finance

All Non-

finance

All

-3.426 -1.168 -2.883 22.82 11.87 20.70 -0.317 -0.283 0.670 1.177 J&M

connection (-0.438) (-0.143) (-0.412) (1.311) (0.791) (1.318) (-1.595) (-1.438) (0.033) (0.062)

GLC 6.182 -5.518 3.523 -3.668 7.875 -1.112 0.194 0.190 -25.79 -25.80

(0.636) (-1.159) (0.450) (-0.557) (0.398) (-0.160) (0.510) (0.498) (-1.582) (-1.589)

Khazanah -15.83* -5.454 -14.80

* 11.10

* 4.415 10.04

* -0.430

** -0.442

** 19.27 19.02

(-1.746) (1.473) (1.767) (1.788) (0.399) (1.743) (-2.035) (-2.102) (0.899) (0.885)

Firm size -5.967***

-3.371***

-5.553***

0.376 6.540*

0.849 -0.261 -0.258 0.142 0.175

(-2.598) (-2.417) (-2.794) (0.138) (1.825) (0.346) (-1.518) (-1.502) (0.026) (0.032)

Firm growth -0.081 -0.034 -0.079 -0.117 -0.584**

-0.155* -0.001 0.001 -0.289 -0.282

(-1.215) (-0.207) (-1.262) (-1.425) (-2.072) (-1.800) (0.216) (0.316) (0.830) (-0.829)

Profitability -5.614*

61.26 -4.236 -0.491**

-0.459**

19.15 19.01

(-1.737) (1.598) (-1.495) (-2.093) (-2.018) (0.891) (0.886)

Number of

Observations

291 35 326 291 35 326 237 241 269 274

R-squared 0.230 0.170 0.260 0.074 0.349 0.074 0.105 0.108 0.042 0.043

28

Table 3: Restructuring period returns and political connections The restructuring period starts in October 1998, shortly after the introduction of capital

controls, and ends in September 2000. The dependent variable is average monthly percentage

returns over the period. Firm size is measured by the natural log of total assets and debt ratio

by total debt divided by total assets. J&M means the firm has a crony connection noted in

Johnson and Mitton’s (2003) paper, GLC for a government linked company and Khazanah a

firm with a degree of government ownership. There were insufficient GLC and Khazanah

firms to use dummy variables for these in the specific financial firms regressions. Industry

dummy variables were also estimated but the results are not reported. Figures in parentheses

are White heteroskedasticity adjusted t-statistics. The symbol* indicates significance at 10%,

**

at 5% and ***

at 1%

Panel A: All Connections Panel B: Specific Connections

Non-

finance

firms

Finance

firms

All firms Non-

finance

firms

Finance

firms

All firms

Intercept 6.044***

-1.092 5.159***

6.267***

-1.795 5.276***

(4.655) (-0.407) (4.236) (4.777) (-0.661) (4.291)

Connection 0.069 0.443 0.165

(0.222) (0.623) (0.570)

J&M -0.001 -0.066 0.004

(-0.004) (-0.086) (0.013)

GLC 0.586 0.321

(1.189) (0.650)

Khazanah -0.030 0.309

(-0.054) (0.481)

Firm size -0.175**

0.275 -0.108 -0.193**

0.332* -0.119

(-2.084) (1.450) (-1.392) (-2.234) (1.725) (-1.496)

Debt ratio -1.744***

-3.383***

-1.849***

-1.731***

-3.340***

-1.831***

(-10.923) (-4.925) (-9.738) (-10.719) (-4.980) (-9.497)

Number of

Observations

296 40 336 296 40 336

R-squared 0.157 0.217 0.152 0.159 0.208 0.154

29

Table 4: Consolidation period returns and political connections The consolidation period starts in October 2000, shortly after the introduction of capital

controls, and ends on 21st June 2002, the Day before Mahathir announced his resignation. The

dependent variable is average monthly percentage returns over the period. Firm size is

measured by the natural log of total assets and debt ratio by total debt divided by total assets.

J&M means the firm has a crony connection noted in Johnson and Mitton’s (2003) paper,

GLC for a government linked company and Khazanah a firm with a degree of government

ownership. There were insufficient GLC and Khazanah firms to use dummy variables for

these in the specific financial firms regressions. Industry dummy variables were also

estimated but the results are not reported. Figures in parentheses are White heteroskedasticity

adjusted t-statistics. The symbol* indicates significance at 10%,

** at 5% and

*** at 1%

Panel A: All Connections Panel B: Specific Connections

Non-

finance

firms

Finance

firms

All firms Non-

finance

firms

Finance

firms

All firms

Intercept -4.674***

-6.761***

-4.526***

-4.657***

-3.180***

-4.609***

(-3.805) (-2.723) (-4.042) (-3.740) (-1.380) (-4.092)

Connection -0.065 -1.538**

-0.234

(-0.207) (-2.174) (-0.787)

J&M -0.355 0.406 -0.321

(-0.974) (0.427) (-0.934)

GLC -0.697 -1.064**

(-1.406) (-2.413)

Khazanah 0.902**

0.825*

(1.995) (1.803)

Firm size 0.440***

0.472***

0.425***

0.438***

0.208 0.468***

(4.576) (2.868) (4.878) (4.476) (1.377) (4.898)

Debt ratio -3.500***

-0.355 -3.159***

-3.539***

-0.583 -3.254***

(-4.971) (-0.331) (-4.843) (-5.061) (-0.514) (-5.005)

Number of

Observations

397 40 437 397 40 437

R-squared 0.184 0.165 0.172 0.194 0.067 0.184

30

Table 5: Transition period returns and political connections The transition period starts 22

nd June 2002, the day Mahathir’s resignation was received by the market, and ends in October 2003, when Badawi became

Prime Minister. The dependent variable is average monthly percentage returns over the period. Firm size is measured by the natural log of total assets and

debt ratio by total debt divided by total assets. J&M means the firm has a crony connection noted in Johnson and Mitton’s (2003) paper, GLC for a

government linked company and Khazanah a firm with a degree of government ownership. There were insufficient GLC and Khazanah firms to use dummy

variables for these in the specific financial firms regressions. Industry dummy variables were also estimated but the results are not reported. Figures in

parentheses are White heteroskedasticity adjusted t-statistics. The symbol* indicates significance at 10%,

** at 5% and

*** at 1%

Panel A: All Connections Panel B: Specific Connections Panel C: Anwar and non-Anwar

Non-finance

firms

Finance

firms

All firms Non-finance

firms

Finance

firms

All firms Non-finance

firms

Finance

firms

All firms

Intercept -0.785 2.241 -0.294 -0.952 1.663 -0.343 -0.950 2.325 -0.323

(-0.567) (0.998) (-0.238) (-0.673) (0.790) (-0.274) (-0.673) (1.047) (-0.259)

Connection -0.521 0.234 -0.445

(-1.532) (0.298) (-1.395)

J&M -0.325 -0.646 -0.374

(-0.789) (-0.657) (-0.966)

GLC -0.819**

-0.431 -0.827**

-0.441

(-2.110) (-1.053) (-2.086) (-1.068)

Khazanah -0.343 -0.351 -0.331 -0.329

(-0.680) (-0.749) (-0.653) (-0.698)

Non-Anwar -0.370 -1.228 -0.461

(-0.729) (-0.940) (-0.948)

Anwar -0.225 0.672 -0.183

(-0.342) (1.344) (-0.319)

Firm size 0.154 -0.109 0.115 0.168 -0.060 0.120 0.168 -0.109 0.118

(1.439) (-0.699) (1.223) (1.546) (-0.440) (1.261) (1.548) (-0.748) (1.247)

31

Debt ratio -1.141 -1.383 -1.148 -1.165 -1.369 -1.145 -1.159 -1.023 -1.133

(-1.580) (-0.842) (-1.621) (-1.593) (-0.817) (-1.599) (-1.601) (-0.582) (-1.599)

Number of

Observations

467 41 508 467 41 508

467

41

508

R-squared 0.057 0.046 0.055 0.058 0.066 0.056 0.058 0.116 0.056

32

Table 5a: Transition period returns and political connections - First Month Returns Only

Panel A: All Connections Panel B: Specific Connections Panel C: Anwar and non-Anwar

Non-finance

firms

Finance

firms

All firms Non-finance

firms

Finance

firms

All firms Non-finance

firms

Finance

firms

All firms

Intercept -7.374**

-10.419 -7.916**

-9.222**

-11.367 -10.633***

-9.232**

-7.196 -10.553***

(-2.061) (-0.899) (-2.285) (-2.461) (-0.991) (-2.946) (-2.455) (-0.590) (-2.932)

Connection 0.236 2.898 0.588

(0.189) (0.752) (0.492)

J&M 1.262 9.851**

2.287

(0.810) (2.541) (1.562)

GLC -1.023 -4.072* -0.983 -4.112

*

(-0.474) (-1.952) (-0.467) (-1.960)

Khazanah -2.620 -1.371 -2.670 -1.287

(-1.225) (-0.658) (-1.255) (-0.616)

Non-Anwar 1.447 6.786 1.971

(0.676) (1.519) (1.015)

Anwar 0.861 17.794***

2.987*

(0.600) (3.419) (1.697)

Firm size 0.395 0.539 0.437 0.552* 0.562 0.653

** 0.554

* 0.250 0.654

**

(1.392) (0.675) (1.609) (1.842) (0.727) (2.327) (1.840) (0.320) (2.306)

Debt ratio 0.828 -0.462 0.722 0.642 -1.633 0.372 0.621 0.985 0.418

(0.852) (-0.060) (0.735) (0.647) (-0.260) (0.377) (0.603) (0.147) (0.411)

Number of

Observations

455 42 497 455 42 497

455

42

497

R-squared 0.010 0.053 0.013 0.016 0.210 0.029 0.016 0.258 0.029

33

Table 6: Resolution period returns and political connections The resolution period starts in November 2003, immediately after Badawi took power, and

ends on 21st July 2005, the day the currency peg was removed. The dependent variable is

average monthly percentage returns over the period. Firm size is measured by the natural log

of total assets and debt ratio by total debt divided by total assets. J&M means the firm has a

crony connection noted in Johnson and Mitton’s (2003) paper, GLC for a government linked

company and Khazanah a firm with a degree of government ownership. There were

insufficient GLC and Khazanah firms to use dummy variables for these in the specific

financial firms regressions. Industry dummy variables were also estimated but the results are

not reported. Figures in parentheses are White heteroskedasticity adjusted t-statistics. The

symbol* indicates significance at 10%,

** at 5% and

*** at 1%

Panel A: All Connections Panel B: Specific Connections

Non-

finance

firms

Finance

firms

All firms Non-

finance

firms

Finance

firms

All firms

Intercept -6.238***

-8.170***

-6.803***

-6.007***

-7.113***

-6.447***

(-4.474) (-3.137) (-5.351) (-4.246) (-3.550) (-5.070)

Connection 0.132 -1.269 -0.071

(0.364) (-1.465) (-0.212)

J&M -0.316 -2.129**

-0.563

(-0.738) (-2.185) -1.436

GLC 0.464 0.455

(0.785) (0.967)

Khazanah 0.453 0.462

(0.760) (0.843)

Firm size 0.252***

0.561***

0.278***

0.233**

0.490***

0.268***

(2.670) (3.387) (3.514) (2.385) (3.993) (3.117)

Debt ratio -0.576* -4.815

** -0.590

* -0.561

* -4.843

*** -0.574

*

(-1.760) (-2.514) (-1.689) (-1.788) (-2.770) (-1.727)

Number of

Observations

512 41 553 512 41 553

R-squared 0.103 0.370 0.107 0.106 0.450 0.113

34

Table 7: Final period returns and political connections The final period starts on 22

nd July 2005, the day after the currency peg was removed, and

ends in June 2006. The dependent variable is average monthly percentage returns over the

period. Firm size is measured by the natural log of total assets and debt ratio by total debt

divided by total assets. J&M means the firm has a crony connection noted in Johnson and

Mitton’s (2003) paper, GLC for a government linked company and Khazanah a firm with a

degree of government ownership. There were insufficient GLC and Khazanah firms to use

dummy variables for these in the specific financial firms regressions. Industry dummy

variables were also estimated but the results are not reported. Figures in parentheses are

White heteroskedasticity adjusted t-statistics. The symbol* indicates significance at 10%,

** at

5% and ***

at 1%

Panel A: All Connections Panel B: Specific Connections

Non-

finance

firms

Finance

firms

All firms Non-

finance

firms

Finance

firms

All firms

Intercept -7.427***

1.215 -6.001***

-7.799***

1.052 -6.331***

(-4.896) (0.434) (-4.434) (-5.040) (0.383) (-4.532)

Connection 0.175 0.296 0.181

(0.462) (0.373) (0.519)

J&M 0.668 0.625 0.674

(1.542) (0.504) (1.654)

GLC -0.600 -0.636

(-0.801) (-1.008)

Khazanah -0.134 -0.017

(-0.192) (-0.026)

Firm size 0.628***

-0.053 0.516***

0.658***

-0.041 0.542***

(5.273) (-0.286) (4.888) (5.408) (-0.228) (4.977)

Debt ratio -3.413***

1.853 -3.157***

-3.741***

1.581 -3.227***

(-4.433) (0.664) (-4.171) (-4.489) (0.551) (-4.250)

Number of

Observations

556 44 600 556 44 600

R-squared 0.126 0.016 0.117 0.130 0.023 0.121

35

Appendix – Politically Connected Firms

Data on unofficial political crony connections, called “Johnson and Mitton” here, is sourced

from information in table A1 of Johnson and Mitton (2003) based on Gomez and Jumo

(1997).

Government Linked Companies (GLCs) are defined as companies that have a primary

commercial objective and in which the Malaysian Government has a direct controlling stake.

Controlling stake refers to the Government’s ability to appoint board members, senior

management, make major decisions (e.g contract awards, strategy, restructuring and

financing, acquisitions and divestments etc) directly or through government linked investment

companies. Officially listed GLCs serve on an advisory committee and are expected to act

“responsibly” in the country’s interest. The names of these companies were sourced from a

media release from the Transformation Management Office of 21st July 2006

Khazanah firm have some degree of government ownership through the government’s

investment arm Khazanah Nasional Berhad (KNB). Theses firms were identified through the

KNB website.

Company Connection Johnson

& Mitton

Government

linked

company

Khazanah

Advance Synergy Daim, Anwar x

Advance Synergy Capital Daim, Anwar x

Affin Holdings x

AIC x

Amcorpgroup UMNO x

Antah Holdings Mahathir x

Astro All Asia Networks x

Bandar Raya Dev. MCA x

Berjaya Daim x

Berjaya Sports Toto Daim x

BIMB Holdings x

Bintulu Port Holdings x

Boustead Holdings x

BSA International x

Bumiputra-Commerce Hldg. x

Cement Inds.of Malaysia x

Chemical Malaysia x

CSM Daim x

Cycle & Carr. Bintang Daim x

Damansara Realty UMNO x

Drb-Hicom x

E & O Property Dev. Daim x

Ecm Libra Unspecified x

Edaran Otomobil Nasional x

Ekran Daim, Mahathir,

Abdul Taib

Muhmud

x

Faber Group UMNO x x

Gold Bridge Engr.& Con. x

Golden Plus Holdings Anwar x

Guocoland (Malaysia) Anwar x

36

Halifax Capital Anwar x

Ho Hup Construction Daim x x

Hong Leong Bank Anwar x

Hong Leong Finl.Gp. Anwar x

Hong Leong Industries Anwar x

Hume Industries Mal. Anwar x

Idaman Unggul Anwar x

Java Daim x

JT International Daim x

KFC Holdings (Malaysia) Anwar x

Kretam Holdings Daim x

Kumpulan Fima Daim x

Kumpulan Guthrie x

Land & General Daim x

Landmarks Daim x

Magnum Daim x

Malakoff UMNO x

Malayan Banking x

Malaysia Airports Hdg. x x

Malaysia Building Soc. x

Malaysian Airline Sy. Daim x x x

Malaysian Res. Daim, Anwar x x

Media Prima UMNO x

Metroplex Unspecified x

MISC Bhd. x

Multi-Purpose Holdings Daim x

Mycom Ghafar Baba x

Naluri Unspecified x

Nanyang Press Hdg. Anwar x

New Straits Times Press Anwar x

OYL Industries Anwar x

Pan Malaysia Capital Daim x

Park May x

Pharmaniaga x

Plus Expressways x

Pos Mal.&Svs.Hdg. x x

Prime Utilities Daim, Anwar x

Proton Holdings x x

Rashid Hussain Daim x

Sapura Technology Mahathir x

Sime Darby x

Star Publication (Mal.) Daim x

Tebrau Teguh Daim x

Telekom Malaysia x x

Tenaga Nasional x x

TH Plantations x

Time Dotcom x

Time Engineering Daim x x

Tradewinds (Mal.) x

UDA Holdings x

37

UEM Builders x

UEM World Daim x x x

UMW Holdings x

United Plantations Daim x

Utusan Melayu (Malaysia) UMNO x

Wijaya Baru Global Daim, Mahathir,

Abdul Taib

Muhmud

x