<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Despite various studies on good corporate governance (GCG), many GCG mechanisms do not seem to work effectively in Indonesian companies due to frequent conflicts between majority and minority shareholders. A more independent party needs to be offered to solve this unique agency problem. This study attempts to analyze how independent parties; foreign and domestic institutional ownership, and independent commissioners may provide solution to agency problem. Results of panel data regression show a positive and significant influence of foreign institutional ownership on dividends and stock prices, whereas domestic institutional ownership and independent commissioners do not significantly affect shareholder wealth. The study also proposes a new model to minimize the possibility of agency problems in Indonesian context through the establishment of foreign institutional ownership as an independent party.</p></abstract>

Despite various studies on good corporate governance (GCG), many GCG mechanisms do not seem to work effectively in Indonesian companies due to frequent conflicts between majority and minority shareholders. A more independent party needs to be offered to solve this unique agency problem. This study attempts to analyze how independent parties; foreign and domestic institutional ownership, and independent commissioners may provide solution to agency problem. Results of panel data regression show a positive and significant influence of foreign institutional ownership on dividends and stock prices, whereas domestic institutional ownership and independent commissioners do not significantly affect shareholder wealth. The study also proposes a new model to minimize the possibility of agency problems in Indonesian context through the establishment of foreign institutional ownership as an independent party.

Independent Parties in Minimizing Agency Problem in Indonesia: An Alternative Model

HOLISTICA – Journal of Business and Public Administration

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Despite various studies on good corporate governance (GCG), many GCG mechanisms do not seem to work effectively in Indonesian companies due to frequent...

Independent Parties in Minimizing Agency Problem in Indonesia: An Alternative Model

Published Online: Apr 13, 2020

Page range: 13 - 28

Received: Aug 01, 2019

Accepted: Feb 01, 2020

DOI: https://doi.org/10.2478/hjbpa-2020-0002

Keywords
Good Corporate Governance, Domestic Institutional Ownership, Foreign Institutional Ownership, Independent Commissioner, Shareholder Value

© 2020 Dito Rinaldo et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Independent Parties in Minimizing Agency Problem in Indonesia: An Alternative Model

Published Online: Apr 13, 2020

Page range: 13 - 28

Received: Aug 01, 2019

Accepted: Feb 01, 2020

DOI: https://doi.org/10.2478/hjbpa-2020-0002

KeywordsGood Corporate Governance, Domestic Institutional Ownership, Foreign Institutional Ownership, Independent Commissioner, Shareholder Value

© 2020 Dito Rinaldo et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
Good Corporate Governance, Domestic Institutional Ownership, Foreign Institutional Ownership, Independent Commissioner, Shareholder Value