The Impact of Ownership Concentration, Structure, and Corporate Governance to the Firm’s Performance and Credit Rating: Indonesian Case Study
69 Pages Posted: 28 Jul 2015 Last revised: 30 Jul 2015
Date Written: July 27, 2015
Abstract
The objective of this paper is to provide evidence whether firms with more or less concentrated ownership and better corporate governance will have better performance and enjoy higher credit ratings, as default risk will be reduced. While some theories and empirical studies suggest that ownership structure affects firms’ performance, some others suggest there is no such relationship. Also whether the practice of corporate governance is for the appearance of compliance to the regulation only and therefore it does not have positive impact to the shareholders and creditors.
This paper investigates the relationship between ownership concentration and structure, governance mechanism and firm performance in Indonesia listed companies for a sample of 271 firms during 2006.
The results of the regressions tend to support the above hypothesis. In Indonesia, companies are still dominated by single largest or majority shareholders, with its positive effect that it will minimize the agency cost with the management, thus improves performance.
Keywords: corporate governance, firm performance, credit ratings
JEL Classification: G34
Suggested Citation: Suggested Citation