Abstract
Two-tier board system and Indonesian family owned firms performance
Highlights
Family-owned enterprises are accounted for 15% of the world’s largest firms in 2010 and will move to 40% by 2025 (GBG Indonesia, 2016)
This study has aimed to look at the performance of family firms in Indonesia, which have a system of two boards (Two-tier system) including the relationship between family ownership, family involvement in the monitoring and management with firm performance
In terms of family involvement in the board of supervision (BOC), the results of the test revealed that family involvement in the Board of Commissioners (BOC) showed a positive but not significant effect on firm performance, not supporting the second hypothesis
Summary
Family-owned enterprises are accounted for 15% of the world’s largest firms in 2010 and will move to 40% by 2025 (GBG Indonesia, 2016). According to Indonesia’s Company Law, all Indonesian firms are required to adopt two boards system in the organizational structure of the firm (Undang-Undang Perseroan Terbatas or “UUPT”). This system puts the responsibility of the management in the hands of management board, Board of Directors (BOD), or known as Dewan Direksi, while responsibilities in maintaining BOD’s work are carried out by supervisory board, Board of Commissioners (BOC), or known as Dewan Komisaris. Many previous studies looking at the effects of ownership and family involvement in management have been accomplished in countries with one-tier board system and found mixed findings (Millet‐Reyes & Zhao, 2010; Alizadeh et al, 2014). Many questions regarding the impact of family involvement in two-tier boards in Indonesian firm are still unanswered
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