Macquarie University
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Family firms and corporate governance in an environment with a weak institutional context: evidence from listed companies in Indonesia

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posted on 2023-02-09, 23:05 authored by Heyvon Herdhayinta

This thesis by publication explores family firms and corporate governance in a context with weak institutions. In particular, family firms in this environment may have different characteristics than those in a strong institutional context. Weak institutional contexts are present in emerging countries, such as Indonesia, and are characterised by weak investor protection, weak corporate governance mechanisms, low levels of market development, high political intervention, high corruption, political instability, and family dominance. This thesis consists of three papers, which are described below.

Paper 1 analyses the relationship between voluntary disclosure and ownership structure in Indonesia, a country with weak investor protection and a low level of market development. This study divides firms’ ownership structures into family firms, state-owned enterprises (SOEs), and other firms and develops a disclosure index to measure both financial and nonfinancial voluntary disclosure. Using hand-collected data, the results reveal that in Indonesia, family firm ownership is negatively associated with the extent of voluntary disclosure. However, there is a positive association between SOEs and the extent of voluntary disclosure. There are differences between family firms and SOE due to different agency conflicts which have rarely been compared in previous studies. This study can support the improvement of regulation and investor trust that may increase market participation in Indonesia.

Paper 2 investigates board gender diversity by distinguishing between family female directors and non-family female directors on the boards of directors. Drawing on self-construal theory, this study proposes that family female directors and non-family female directors are not homogeneous, particularly in terms of their motivation, behaviour, and goal pursuit. This study investigates female directorships in an environment with weak formal and informal institutions, in which gender inequality is particularly acute. The findings show that non-family female directors can enhance firm value and promote dividend payouts in a weak institutional environment. Thus, this study indicates that non-family female directors are more effective than family female directors in monitoring and protecting the interests of minority shareholders.

Paper 3 examines the market-dominant minorities (MDM) phenomenon in Indonesia, where ethnic minority businesses have remarkably strong power and dominate the economy. MDM are widespread in 53 countries outside the West but remain under-researched. This study analyses family businesses owned by the Chinese diaspora or overseas Chinese as an ethnic minority in Indonesia. This study draws on the socioemotional wealth (SEW) perspective and investigates these firms’ concerns about protecting their SEW endowment. The findings of an examination of these firms’ cash holdings suggest that minority family businesses hold a higher level of cash than non-minority family businesses. However, minority family business owners involved in management hold a lower level of cash than those not involved in management. These findings imply heterogeneity among family firms. Furthermore, this study also finds that minority family businesses may change their cash policy due to ethnic conflict.

Overall, the three papers in this study contribute to the literature on family businesses and corporate governance beyond the Western context, particularly those with environments with weak institutions. The findings are generalisable to other equivalent settings, such as to other emerging countries.


Table of Contents

Chapter 1: Introduction -- Chapter 2: Study One -- Chapter 3: Study Two -- Chapter 4: Study Three -- Chapter 5: Conclusion -- Appendix -- References

Awarding Institution

Macquarie University

Degree Type

Thesis PhD

Department, Centre or School

Department of Accounting and Corporate Governance

Year of Award


Principal Supervisor

James Lau

Additional Supervisor 1

Carl Shen

Additional Supervisor 2

Elaine Evans


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