Indonesia Conference Directory

Firms with concentrated ownership structures are commonly found in Southeast Asia. In Indonesia, the biggest control of the firm comes from the family. Concentrated ownership can lead to agency problem between controlling shareholders and non-controlling shareholders where controlling shareholders whom also often acts as management, make decisions which bring personal benefit at the expense of non-controlling shareholders for example by investing on risky projects or known as overinvestment. Therefore the existence of independent board is very important. This study aims to proof whether the existence of independent board could lower the tendency of family firms in Indonesia to overinvest. Using firms listed on Indonesia stock exchange from 2011 to 2017 as research samples the presence of independent directors negatively related to overinvestment meanwhile independent commissioner positively related to overinvestment. Moreover, independent directors can weaken the tendency of family firms to overinvest when family ownership on the firms is low.