The Role Of Corporate Governance In Family Control Firms: Evidence From Indonesia

Companies in ASEAN are generally family control firms. Family control firms have specific agency problem that may affect the company’s performance in two different ways, entrenchment and alignment effects. As arguing, corporate governance mechanism in the company should mitigate the agency problem. This study examines the effect of corporate governance mechanism in family control firms to the firm performance. Using 536 Indonesian listed companies data from 2011-2012, this study find that corporate governance mechanism in family control firms are tend to looser than non-family control firms. Family control firms are smaller and higher debt level than non-family control firms. In addition, the firm performance of family control firms is not significantly different from non-family control firms. However, higher proportion of independent board increases family control firm performance. On the other hand, higher quality of external auditor reduces family control firm performance, although in general higher quality of external auditor increases firm performance