The Effect of Pyramidal Ownership Structure to the Financing Policies and Firm Value in Indonesia: Cronyman as Moderating Variable

Abstract

The research to examine the effects of ownership structures on financing policies and firm valuation. The populations are all listed companies in Indonesia Stock Exchange for period of 2013 and 2015. The sample selection technique used purposive sampling and resulting in a final sample of 72 listed firms. Empirical tests are conducted using multiple regressions and two stages least squares regression to test the simultaneous relationship between ownership structure, financing policies and firm value. The estimated results provide support for the hypotheses proposed that the separation of cash flow rights and control rights have led the use of excess leverage among pyramidal companies to preserve ultimate owner’s control. However, we failed to find a significant relationship between firm’s leverage and firm’s value. The conclusion is the simultaneounity relation between ownership structure, leverage and firm value appear that only the ownership structure significantly related with leverage and firm value. Also firm value and leverage ownership impact the ownership structure. Meanwhile, leverage does not appear to have a significant relation with the firm value, or the other way around.

Analisis Pengaruh Kebijakan Dividen dan Kebijakan Hutang Terhadap Nilai Perusahaan

“…Menurut penelitian yang dilakukan oleh Budiyanti et al (2018), menemukan bahwa struktur kepemilikan piramidal dapat mempengaruhi kebijakan pendanaan perusahaan. Leverage yang berlebihan dapat digunakan oleh perusahaan-perusahaan piramida untuk mempertahankan kontrol pemilik utama.…”

The Monitoring Role of Majority Ownership on Indonesian Firm Performance in the Context of Covid-19 Pandemic

“…The effect of ownership concentration on firm performance has been studied by Laporšek et.al [9], Budiyanti et.al [10], Malan et.al [11] and Chen et.al [12]. Laporšek et al [9] found a significant relationship between ownership concentration and firm performance in Slovenia.…”

“…Budiyanti et.al. [10] found an interrelation of pyramidal ownership structure on financial policy for Indonesian firms listed in IDX during 2013 to 2015. Malan et.al [11] found a dominant controlling role of majority shareholder in Malaysia during 1990 to 2010, which expropriate minority shareholder.…”

“…Agrawal and Mandelker [6], Demsetz [7] and Shleifer and Vishny [8] provide the empirical evidence of the existence of large shareholders enhances the monitoring of managers. Laporšek et.al [9], Budiyanti et.al [10], Malan et.al [11] and Chen et.al [12] also shows that concentrated ownership affects firm performance. This issue is become important and more interesting to be empirically tested in nowadays context of Covid-19 pandemic.…”