INDEPENDENT DIRECTORS AND FIRM PERFORMANCE IN FAMILY CONTROLLED FIRMS: EVIDENCE FROM INDONESIA

Prabowo, Muhammad and Simpson , John (2014) INDEPENDENT DIRECTORS AND FIRM PERFORMANCE IN FAMILY CONTROLLED FIRMS: EVIDENCE FROM INDONESIA. APEL Asian-Pasific Economic Literature.

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    Abstract

    We analyse the relationship between board structure and firm performance in family- controlled firms, using a sample of Indonesian non-financial companies. We find that the share of independent directors on the board has an insignificant relationship with firm performance. We suspect that the result is driven by the lack of institutional reforms in relation to the appointment of independent directors. Our analysis shows strong empirical support for the proposition that family control (family ownership and family involvement on the board) is negatively related to firm performance. However, the significant effect of family ownership disappears when family involvement on the board is taken into the model. This result indicates that family ownership is more detrimental to firm performance whenever the family is highly involved in control decisions. Our results suggest that Indonesia needs to implement governance reforms that prevent majority owners from exercising excessive control over firms.

    Item Type: Article
    Subjects: H Social Sciences > H Social Sciences (General)
    H Social Sciences > HD Industries. Land use. Labor
    Divisions: Lembaga Penelitian dan Pengabdian Kepada Masyarakat - LPPM
    Depositing User: Anis Fagustina
    Date Deposited: 26 Apr 2014 17:29
    Last Modified: 28 Oct 2016 15:48
    URI: https://eprints.uns.ac.id/id/eprint/13386

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