The Effect of Ownership Structure and Board Independence Towards Overinvestment Behavior of Family Firm in Indonesia

Novihana  Noor Pradita; Cynthia   Afriani Utama

Article Details

The Effect of Ownership Structure and Board Independence Towards Overinvestment Behavior of Family Firm in Indonesia

Authors:

Novihana Noor Pradita | Cynthia Afriani Utama

Publisher:

KnE Social Sciences

Journal:

KnE Social Sciences Vol.4 Issue 6, pp.1120-1138

Document Type:

Article

Publication Date:

3/2020

Document Language:

English

Document ID (Org No.):

2001518275

pISSN:

2518-668X

Keywords:

Abstract:

 Firms with concentrated ownership structures are commonly found in Southeast Asia. In Indonesia, the biggest control of the firm comes from the family. Concentrated ownership can lead to agency problem between controlling shareholders and non- controlling shareholders where, controlling shareholders together with management, can make decisions which bring personal benefit at the expense of non-controlling shareholders for example by investing on projects with negative NPV or known as overinvestment. This study explains the effect of the presence of directors and independent commissioners on relationship between family ownership and overinvestment. Using firms listed on Indonesia Stock Exchange from 2011 to 2017 as research samples, the presence of independent director is negatively related to overinvestment. From the regression results, only independent directors were found to have a moderating effect in weakening the positive relationship between family ownership and overinvestment. This effect is seen more clearly if family ownership  in the company is low. This is because if family ownership in the company is low the process of selecting a board of directors can be more objective so that the possibility of a number of independent directors sitting on the board of directors is much greater. Thus the effect of moderation by independent directors will be greater in companies with lower family ownership.

Article Details

The Effect of Ownership Structure and Board Independence Towards Overinvestment Behavior of Family Firm in Indonesia

Authors:

Novihana Noor Pradita | Cynthia Afriani Utama

Publisher:

KnE Social Sciences

Journal:

KnE Social Sciences Vol.4 Issue 6, pp.1120-1138

Document Type:

Article

Publication Date:

3/2020

Document Language:

English

Document ID (Org No.):

2001518275

pISSN:

2518-668X

ownership structure

board independence

overinvestment

corporate governance

Indonesia

Issues

Article Details

The Effect of Ownership Structure and Board Independence Towards Overinvestment Behavior of Family Firm in Indonesia

Authors: Novihana Noor Pradita | Cynthia Afriani Utama

Publisher: KnE Social Sciences

Journal: KnE Social Sciences Vol.4 Issue 6, pp.1120-1138

Document Type: Article

Publication Date: 3/2020

Document Language: English

Document ID (Org No.): 2001518275

pISSN: 2518-668X

ownership structure

board independence

overinvestment

corporate governance

Indonesia

Issues

Authors:

Novihana Noor Pradita | Cynthia Afriani Utama

Publisher:

KnE Social Sciences

Journal:

KnE Social Sciences Vol.4 Issue 6, pp.1120-1138

Document Type:

Article

Publication Date:

3/2020

Document Language:

English

Document ID (Org No.):

2001518275

pISSN:

2518-668X