Performance of family-controlled banks: do political connections matter?

Abstract

This paper investigates the effects of political connection on the relationship between family-control and organizational performance. A prediction is advanced hypothesizing that those political connections might help to mitigate the agency problem of family ownership on corporate outcome. A dataset of Indonesian banks over the 2001-2008 periods are analyzed. The data reveals that ownership and market competition display an insignificant changes during the period of observation that eventually prevent the study to explore time effect and individual effect as well. The main findings are that the family-controlled banks have a lower performance than that of their counterparts.