Family, institutional investors ownerships and corporate performance: the case of Indonesia

Abstract

Purpose

This paper aims to investigate the relationship between family and institutional ownerships and corporate performance.

Design/methodology/approach

Using a panel data of 139 nonfinancial companies listed on the Indonesian Stock Exchange from 2009 to 2013, this study used generalized least square model.

Findings

The results show that family ownership has a significant and positive impact on corporate performance, while institutional ownership has significantly and negatively influenced corporate performance. These results imply that family ownership leads to better corporate performance, while institutional ownership leads to lower corporate performance.

Research limitations/implications

Future research would extend to examine different ownership variables, e.g. domestic, foreign and black shareholders ownerships with different performance measures such as profit margin and return on investments (ROI). Then, their results could be compared to the result of this paper.

Practical implications

For shareholders and managers, the result of this study provides a base for shareholder on the importance to have the same understanding as management to improve return of capital invested by them (family capital) through firm’s long- and short-term business decision-making. It is possible for management for doing so because their interest is same. Therefore, this can be an interesting incentive for management. This result of this study also provides practical implication for investors (including international investors) with respect to their funds in the firm with family ownership share. By doing so, they will get better and stable ROI compared to nonfamily-owned business.

Originality/value

This study is original as studies on institutional and family ownerships and corporate performance are limited in the Indonesian context. The use of nonlinearity effect of family ownership and corporate performance in Indonesian case is the first attempt. Therefore, this study contributes to corporate governance literatures by investigating the relationship between family and institutional ownerships and market performance in Indonesian context using the improved methodology.

Citation

Musallam, S.R.M., Fauzi, H. and Nagu, N. (2019), "Family, institutional investors ownerships and corporate performance: the case of Indonesia", Social Responsibility Journal, Vol. 15 No. 1, pp. 1-10. https://doi.org/10.1108/SRJ-08-2017-0155