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.