Determining Ownership Structure Threshold as a Basis for Financial Decision Making: A Panel Quadratic Regression Model

This research examines the agency conflicts to the relation between ownership concentration and firm performance in Indonesia. A 580-firm listed in the Indonesian Stock Exchange over the 2009-2018 period are investigated and analyzed using a panel quadratic regression model. The study documented that the behavior of the largest shareholders was inconsistent. The positive effect is found to be dominant when the ownership concentration was less than 74%; the finding supported the efficient monitoring hypotheses. Meanwhile, the expropriation effect by the largest shareholders occurred at the ownership level above 74%. These findings suggest that regulators and policy-makers should pay attention to the ownership concentration of the largest shareholders to minimize agency problems on public firms in Indonesia.