Abstract
Using an agency theory perspective, this paper examines the influence of family control on the board size and board independence of Indonesian listed firms. Further, the study also seeks to investigate whether family control explains the association between board structure and firm value. This study is expected to enhance our understanding of the role of family firms’ boards in mitigating or exacerbating agency problems, using the setting of an emerging market with a high level of ownership concentration and family control. Indonesia is among economies that adopt a two-tier board system, where corporations are required to have a supervisory board and a management board. Employing a panel data set of Indonesian listed firms from the period of 2005-2007, we report limited evidence that family control has a negative impact on board size. However, family-controlled firms are likely to mitigate agency issues by employing smaller boards. Further, board independence is found to demonstrate no significance in either mitigating or exacerbating agency issues.
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