Linear and Non-linear Approaches in Testing Managerial Ownership on the Firm Value: Evidence Indonesian Firms

Abstract

The purpose of this study was to determine the effect of managerial ownership on firm value through the linear and non-linear approaches. This study was conducted on 54 observations which included the Indonesian Most Trusted Companies in 2008 until 2011. The results of this study showed that managerial ownership does not have a linear effect on the firm value, but have non-linear effect on the firm value. Turning point in the managerial ownership were 3.36% and15.15%. At ownership of 0%-3.36%, it may cause a decrease in the value of the company (entrenchment effect) while 3.36% to 15.15% ownership may result in an increase in the value of the company (alignment effect)