CORPORATE CONTROL, AGENCY PROBLEM AND BOARD COMPOSITION: EVIDENCE FROM INDONESIA

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Abstract

The study investigates the impact of agency problem and the distribution of corporate control on board composition using a dataset consisting of 190 listed firms in Indonesia. The conceptual framework is derived from agency theory assuming that board composition is endogenously determined by firm’s specific environment. The study reveals that corporate control drives the composition of the board. The different types of large shareholders are found to pursue different strategies in relation to the board composition. While domestic and foreign investors rely on independent board, controlling family prefer to structure a less independent board. This suggests that the battle for corporate control between controlling family, in one side, and unrelated domestic and foreign investors begins with the structure of board. The findings imply that the type of large shareholder does matter in determining the device of corporate control.

Keywords: Board Composition, Agency Problem, Corporate Control, Ownership Structure

How to cite this paper: Haryono, T., Rahmawati, Purwaningsih, Y., Prabowo, M. A., & Suratman, E. (2015). Corporate control, agency problem and board composition: Evidence from Indonesia. Corporate Board: role, duties and composition, 11(2), 121-131. https://doi.org/10.22495/cbv11i2art10