Ownership Concentration and Firm Performance in Indonesia

Juanda Juanda



Objective – The study aim to investigate the effect of ownership concentration on the financial performance of firms listed in the Indonesian Stock Exchange from 2008 to 2012.


Design/methodology – Data for the study were collected from the Indonesia Stock Exchange on or prior to 2 January 2008 and remain listed until 31 December 2012. The population is 140 industrial and manufacturing companies listed on the Indonesia Stock Exchange. But, there are only 43 companies meet the sampling criteria. To investigate the influence of ownership concentration on firm performance in Indonesia, multiple linear regression method was performed.


Results – The results of this study is the ownership concentration positively and significantly influences firm performance in Indonesia and it acts as a substitute for shareholder protection.


Research limitations/implications – The samples are only collected from manufacturing industry and does not take into account the shareholder identity. It is quite possible that shareholder identity influences the relationship between ownership concentration and firm performance. Therefore, future researchers are advised to take into account the shareholder identity so that it becomes clear whether shareholder identity indeed has an effect on such relationship.



ROA; Ownership Concentration; Large Shareholders; Firm Performance

Full Text:



Anderson, R.C. and Reeb, D.M. (2003) Founding-family ownership and firm performance: Evidence from the S&P 500. The Journal of Finance, 58 (3): 1301–1327

Asian Development Bank (2000) Corporate governance and finance in East Asia: a study of Indonesia, Republic of Korea, Malaysia, Philippines, and Thailand. Consolidated Report: 1

Berglöf, E. (1988) Capital structure as a mechanism of control: a comparison of financial systems. Harvard Law School Discussion Paper No. 48

Carney, M. and Gedajlovic, E. (2002) The co-evolution of institutional environments and organizational strategies: The rise of family business groups in the ASEAN region. Organization Studies, 23 (1): 1-29

Cho, M.H. (1998) Ownership structure, investment, and the corporate value: an empirical analysis. Journal of Financial Economics, 47: 103-121

Claessens, S. and Djankov, S. (1999) Ownership concentration and corporate performance in the Czech Republic. Journal of Comparative Economics, 27 (3): 498–513

Claessens, S., Djankov, S. and Fan, J., et al. (2001) The pattern and valuation effects of corporate diversification: a comparison of the United States, Japan, and other East Asian economies. WIDER Discussion Papers // World Institute for Development Economics Research (UNU-WIDER), No. 2001/127

Claessens, S., Djankov, S. and Lang, L.H.P. (2000) The separation of ownership and control in East Asian corporations. Journal of Financial Economics, 58: 81-112

Demsetz, H. and Lehn, H. (1985) The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93 (6): 1155-1177

Demsetz, H. and Villalonga, B. (2001) Ownership structure and corporate performance. Journal of Corporate Finance, 7: 209-233

Denis, D.K. and McConnell, J.J. (2003) International corporate governance. The Journal of Financial and Quantitative Analysis, 38 (1): 1-36

Fan, J.P.H. and Wong, T.J. (2002) Corporate ownership structure and the informativeness of accounting earnings in East Asia. Journal of Accounting and Economics, 33: 401-425

Field, A. (2013) Discovering statistics using IBM SPSS statistics. 4th ed. Los Angeles: SAGE

Gomes, A. (2000) Going public without governance: Managerial reputation effects. The Journal of Finance, 55 (2): 615-646

Gul, F.A., Kim, J.B. and Qiu, A.A. (2010) Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: Evidence from China. Journal of Financial Economics, 95 (3): 425-442

Heugens, P.P., Van Essen, M. and Van Oosterhout, J. (2009) Meta-analyzing ownership concentration and firm performance in Asia: towards a more fine-grained understanding. Asia-Pacific Journal of Management, 26 (3): 481-512

Klein, P., Shapiro, D. and Young, J. (2005) Corporate governance, family ownership and firm value: the Canadian evidence. Corporate Governance: An International Review, 13 (6): 769-784

La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (1999) Corporate ownership around the world. The Journal of Finance, 54 (2): 471-517

La Porta, R., Lopez-de-Silanes, F., Shleifer, A. et al. (2000) Investor protection and corporate governance. Journal of Financial Economics, 58: 3-27

La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. et al. (2002) Investor protection and corporate valuation. The Journal of Finance, 57 (3): 1147-1170

La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. et al. (1998) Law and finance. Journal of Political Economy, 106 (6): 1113-1155

Leech, D. and Leahy, J. (1991) Ownership structure, control type classifications and the performance of large British companies. The Economic Journal, 101 (409): 1418-1437

Lehmann, E. and Weigand, J. (2000) Does the governed corporation perform better? Governance structures and corporate performance in Germany. European Finance Review, 4: 157–195

Lemmon, M. L. and Lins, K.V. (2003) Ownership structure, corporate governance, and firm value: evidence from the East Asian financial crisis. The Journal of Finance, 58 (4): 1445-1468

Lukviarman, N. (2004) Ownership structure and firm performance: the case of Indonesia. PhD Thesis, Curtin University of Technology.

O’Brien, R.M. (2007) A caution regarding rules of thumb for Variance Inflation Factors. Quality & Quantity, 41: 673-690

Prowse, S.D. (1992) The structure of corporate ownership in Japan. The Journal of Finance, 47 (3): 1121-1140

Shleifer, A. and Vishny, R.W. (1986) Large shareholders and corporate control. Journal of Political Economy, 94 (3): 461-488

Thomsen, S. and Pedersen, T. (2000) Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 21 (6): 689–705

Transparency International (2015) Corruption Perceptions Index 2015 (online). Available from: http://www.transparency.org/cpi2015 (Accessed January 2017)

Wulandari, E.R. and Rahman, A.R. (2004) Political patronage, cross-holdings and corporate governance in Indonesia. The Governance of East Asian Corporations: 71-95

Xu, X. and Wang, Y. (1999) Ownership structure and corporate governance in Chinese stock companies. China Economic Review, 10 (1): 75-98

Zeckhauser, R.J. and Pound, J. (1990) “Are large shareholders effective monitors? An investigation of share ownership and corporate performance.” In Hubbard, R.G. (ed.) Asymmetric information, corporate finance and investment. Chicago: University of Chicago Press. pp. 149-180

DOI: https://doi.org/10.24815/jaroe.v1i2.11609


  • There are currently no refbacks.

Published by:

Accounting Department
Economics and Business Faculty
Syiah Kuala University
Kopelma Darussalam, Banda Aceh, Indonesia - 23111
E-ISSN: 2621-1041


Creative Commons License
Journal of Accounting Research, Organization and Economics by Accounting Department of Economics and Business Faculty of Syiah Kuala University is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at http://www.jurnal.unsyiah.ac.id/JAROE/index.