Active family control and company performance: the role of foreign investment moderation and bank debt

Perminas Pengeran

doi:10.24912/jm.v22i1.311

Abstract

This study was to examine the moderating role of foreign ownership and Bank debt on the influence of active family control toward the family firm performance. Based on purposive sampling techniques, this study used 18 family firms listed in Indonesia Stock Exchange (IDX), during the period of 2006-2011. The results of this study showed several important findings. Firstly, foreign ownership positively moderated the effect of active family control on profitability. Secondly, likewise, bank debt negatively moderated the effect of active family control on profitability. Thirdly, foreign ownership negatively moderated the effect of active family control on dividends payment. Finally, bank debt positively moderated the influence of active family control on dividends payment. These results revealed that the foreign ownership and bank debt serves as moderator on the relationship between active family control and financial performance.

Highlights

Controls have the potential to create conflicts between owners and owners, leading to the deprivation of wealth of minority owners by family owners (Yoshikawa and Rasheed, 2010; Jiang and Peng, 2011a)
This study aims to examine the role of moderation of foreign ownership and bank debt on the influence of active family control on the financial performance of family firms
The results show that bank debt moderates negatively the influence of active family control and profitability

Summary

Introduction

Controls have the potential to create conflicts between owners and owners, leading to the deprivation of wealth of minority owners by family owners (Yoshikawa and Rasheed, 2010; Jiang and Peng, 2011a). In other words, when the family has greater control, the entrepreneur's potential effects and the company's bad performance grow larger. These emerging problems create conflicts between dominant owners such as the owner's family and other owners. This type of conflict is referred to as owner and owner conflict (Jiang and Peng, 2011b; Sauerwald, and Peng, 2013)

Objectives

Methods

Results

Conclusion