Abstract
This research examines the effect of institutional ownership on firm value. In doing so, institutional ownership will be divided into two groups; passive owner and active owner. The active owner who holds more than 5 percent of stock is hypothesized to have positive relationship with firm value. However, this positive relationship will decline considerably as the percentage of ownership increases. The other variables, namely; passive institutional ownership, public ownership, and firm size will be used as well to examine the consistent relationship between institutional ownership and firm value. Rather than examining it linearly, this research intends to examine the non-linear effect of institutional ownership on firm value. The samples are drawn from all firms listed at the Jakarta Stock Exchange from 2002 to 2005. Using the non-linear regression analysis, the results show the existence of nonlinear relationship between active institutional owner and firm value in Indonesia.
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