PUBLIC FIRM'S BACKGROUND ON THE PERFORMANCEGOVERNANCE RELATION: EVIDENCE FROM INDONESIA

Abstract

This study purports to test two governance issues in Indonesian listed firms. To explore corporate
governance mechanisms in Indonesia, we ought to understand that listed firms on the
Indonesian capital market came from two initial business backgrounds: (1) private firms, which
had been private businesses before going public; and (2) Badan Usaha Milik Negara (stateowned
enterprises), which were owned by the Indonesian government and managed by
government-appointed management. Although both types of the firms have gone public, their
differences might remain intact, such as differences in size, lines of business, market share, and
the efficiency of corporate governance. Using 442 raw sample from all firms listed on the
Indonesian Stock Exchange during 2003-2012, we find that governance characteristics and
performance relation does differ between previously SOE firms and previously private firms.
However, we do not find evidence of distinct financial performance between previously SOE
firms and previously private firms.
1 Corresponding author. We are grateful for the research
grant provided by the Faculty of Economics and Business,
Universitas Gadjah Mada.
Keywords: SOE firms, private firms, corporate governance, firm performance, firm background