Abstract
This study investigates the relationship between family ownership, agency costs, financial performance, and companies’ business strategies. The targeted population of this study were all 143 manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2007–2014. About 31% (45) of these manufacturing companies are family companies. The hypotheses were tested using the partial least-square (PLS) method. Our findings reveal that the companies’ business strategies are not affected by the family ownership. Family ownership and business strategies influence companies’ financial performance. Agency costs influence business strategy and financial performance, and this shows that agency costs contribute to both the increase and decrease of financial performance. Business strategy mediates the relationship between family ownership and financial performance. This shows that family companies do not concentrate on financial goals but rather on the sustainability. Business strategy influences the relationship between agency costs and financial performance. This shows that funds can be redistributed in the course of business strategy planning, which will, in turn, improve the company’s development.
Highlights
Formation of a company purports to improve the shareholders’ benefit
The results of the study is Family ownership influences company financial performance, Agency costs influence business strategy, Agency costs influence financial performance which shows that agency costs contribute to the increase and decrease of financial performance, Business strategy influences financial performance, The business strategy is able to influence relationship between family ownership and financial performance
Business strategy influences the relationship between agency costs and financial performance, and Family-concentrated companies do not influence business strategy used by the companies since uniqueness and company characteristics are important in applying the strategy
Summary
Formation of a company purports to improve the shareholders’ benefit. It is depicted by the company’s financial performance. The company’s financial performance is obtained from accounting information in the form of financial reports which convey the actual condition. Sound financial performance is essential for the stakeholders such as creditors, suppliers, employees and clients. Financial performance is an achievement of a company in a certain period, which reflects the level of the company’s financial soundness (Sawir 2005). A sound financial performance can be achieved by control from the owner and the director
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
