FAMILY AS THE ULTIMATE OWNERSHIP AFFECTS TO FIRM PERFORMANCE

Abstract

The objective of this paper is to investigate family ownership as controlling shareholder affecting to firm performance. Sample of this study is 604 observations during 2001-2007. This study uses purposive sampling to collect data from the Indonesian Stock Exchange. This study collects and searches ultimate ownership on chain of ownership structure in manufacturing companies. This study uses ultimate ownership because the reality of ownership structure in public companies in Indonesia is concentrated. This study identifies direct and indirect ownerships on chain of ownership. Based on direct and indirect, this study can identify ultimate ownership whether are family or not family ownership. This study uses return on assets to proxy firm performance. The return is operating income. The results of this study are family ownership negatively affect to firm performance. It indicates that higher ownership by family leads lower firm performance. These results suggest that entrenchment effect is more dominant than alignment effect on the family ownership.