1

PAST PERFORMANCE, FAMILY BUSINESS AND CEO

SUCCESSION: THE CASE OF INDONESIA
THESIS
As a partial fulfillment to achieve a Master Degree
Study Program in Magister Management
Main interest:
Strategic Management

Submitted by
Wulan Permatasari
NIM: S411408040

PROGRAM MAGISTER MANAJEMEN

FAKULTAS EKONOMI DAN BISNIS
UNIVERSITAS SEBELAS MARET
SURAKARTA
2016

APPROVAL

PAST PERFORMANCE, FAMILY BUSINESS AND CEO

SUCCESSION: THE CASE OF INDONESIA
Prepared and Compiled by:
Wulan Permatasari
NIM: S 411408040

Approved by Advisor
On: 11th April 2016
Advisor

Dr. Wisnu Untoro, MS

NIP. 195402201980031002

The Head of Magister Management Program

Sebelas Maret University

Prof. Dr. Asri Laksmi Riani, MS

NIP. 195901301986012001

LEGITIMATION FROM THE BOARD OF EXAMINERS

PAST PERFORMANCE, FAMILY BUSINESS AND CEO

SUCCESSION: THE CASE OF INDONESIA
Compiled by
WULAN PERMATASARI
S. 411408040
This theses has been defended and examined by the Board of Examiners
On 22th April 2016

Board of Examiners
Chairman

Name

Signature

: Prof. Dr. Asri Laksmi Riani, SE, M.Si

NIP. 195901301968012001
Examiner

: Irwan Trinugroho, SE, M.Si, Ph.D

198411062009121004
Advisor

: Dr. Wisnu Untoro, MS

NIP. 195402201980031002
Director of PPS UNS

Head of Magister
Management Program

Prof. Dr. M. Furqon Hidayatullah, M.Pd

NIP. 196007271987021001

Prof. Dr. Asri Laksmi Riani, MS

NIP. 195901301968012001

PRONOUNCEMENT

Name

: Wulan Permatasari

NIM

: S 4114080140

This is to certify that I wrote this thesis entitled PAST PERFORMANCE,

FAMILY BUSINESS AND CEO SUCCESSION: THE CASE OF INDONESIA.
It is not a plagiarism or made by others. Anything related to others work is written in
quotation, the source of which is listed in bibliography. If then this pronouncement
proves wrong. I am ready to accept any academic punishment, including withdrawal
or cancellation of my academic degree.

Surakarta, April 2016

Declared by,

Wulan Permatasari
S. 411408040

MOTTO

Nothing last forever

(Unknown)

DEDICATION

to my beloved sons
Garda Adiwitya Sugiarto and Gheysar Rizky Sugiarto

ACKNOWLEDGMENT
All praise and honor be to my God, Allah SWT who always gives bless,
mercy, love, grace and joy to the writer. Then the writer would like to express her
special gratitude to:
1.

Prof Dr. Muhammad Furqon Hidayatullah, M.Pd, the Director of Graduate

School of Sebelas Maret University for giving permission to conduct this
research

2.

Dr. Hunik Sri Runing, the Dean of Economics and Business Faculty of
Sebelas Maret University for giving permission to conduct this study.

3.

Prof. Dr. Asri Laksmi Riani, SE.MS, the head of Magister Management
Program of Sebelas Maret University who has given her recommendation and
opportunity to write this thesis

4.

Dr. Wisnu Untoro MS, as Advisor for this research, for his valuable
opportunity and guidance which are very helpful in finishing this thesis

5.

Irwan Trinugroho, SE, M.Si. Ph. D, as Supervisor, for his invaluable insight,
guidance and assistance during the whole process of this thesis writing.

6.

Doddy Setiawan, SE, M.Si. IMRI Ph. D. Ak, as co reader, for his worthy,
correction and suggestion to improve the quality of this thesis.

7.

My colleagues at Magister Management Program batch 43, very thankful for

the solidarity and friendship during our course time.

8.

The writers parent Drs Agus Subroto and Prof. Dr. Hartiwiningsih, SH
M.Hum, very grateful for the love, compassion and never ending support that
always be given to the writer.

9.

Sisters and brothers in law, dr. Shanti Kirana, Sp. PD. M. Kes and dr. Priyo
Budi Santoso, Sp. A. M.Kes, Nareswari Kencana SH and Iptu (Pol) M Debby
Tri Andrestian, SIK, Dinda Carissa, S.Ked, very thankful for the joy and love
that we always share together.

10.

Mayor Inf Roni Sugiarto, SH, the writers life companion, the writer would
not be able to accomplish this research without his material and immaterial
support, thank you for the opportunity, the scholarship and the never ending
understanding.
The writer accepts every comment and suggestion to make this thesis even

better, where it can be sent to the writers email address wulansugiarto@gmail.com.

Hopefully, this thesis can gives benefit for future educational research.
The writer
Wulan Permatasari

TABLE OF CONTENT
Page
TITLE...................................................................................................................... i
APPROVAL............................................................................................................. ii
LEGITIMATION FROM THE BOARD OF EXAMINERS................................... iii
PRONOUNCEMENT.............................................................................................. iv
MOTTO................................................................................................................... v
DEDICATION......................................................................................................... vi
ACKNOWLEDGEMENT....................................................................................... vii
TABLE OF CONTENT........................................................................................... ix
LIST OF TABLES................................................................................................... xii
LIST OF FIGURES................................................................................................. xiii
ABSTRAK (INDONESIAN).................................................................................. xiv
ABSTRACT (ENGLISH)........................................................................................ xv
CHAPTER I
1.1 Introduction........................................................................................................ 1
1.2 Introduction to Problem Definition.................................................................... 7
1.3 Problem Definition and Research Question....................................................... 10
1.4 Research Objectives........................................................................................... 11
1.5 Thesis Structure................................................................................................. 12
CHAPTER II
LITERATURE REVIEW......................................................................................... 13
2.1 Family Owned Business.................................................................................... 13
2.1.1 Definition of Family Owned Business............................................................ 13
2.1.2 The Advantages of Family Owned Business.................................................. 14
2.1.3 The Disadvantages of Family Owned Business.............................................. 16
2.2 Past Performance to CEO Succession............................................................... 16

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2.3 Family Member Composition in Board of Directors and Board of

Commissioners................................................................................................... 20
2.4 Successor Firm Experience to CEO Succession................................................ 25
2.5 Conceptual Model ............. 26
2.6 Control Variables .. 28
2.5.1 Firm Size

. 28

2.5.2 Firm Age . 28

2.5.3 Leverage

29

CHAPTER III
METHODOLOGY.................................................................................................. 30
3.1 Data and Sample................................................................................................ 31
3.2 Variables Measurement...................................................................................... 32
3.3 Data Analysis Technique.................................................................................... 37
CHAPTER IV
DATA ANALYSIS................................................................................................... 39
4.1 Descriptive Statistics.......................................................................................... 39
4.2 Correlation Test.................................................................................................. 42
4.4 Logistic Regression............................................................................................ 44
CHAPTER V
CONCLUSION........................................................................................................ 49
5.1 Conclusion......................................................................................................... 49
5.2 Contribution to the Literature and Managerial Practice. 51
5.3 Limitation and Future Research......................................................................... 55
REFERENCES........................................................................................................ 55
APPENDIX A.......................................................................................................... 59
APPENDIX B.

63

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LIST OF TABLES
Page
Table 3.1 Research Samples.................................................................................

35

Table 4.1 Descriptive Statistics............................................................................

43

Table 4.2 Correlation Test.....................................................................................

45

Table 4.10 Variables in the Equation....................................................................

47

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LIST OF FIGURES
Page
Figure 2.1 Hypotheses Framework........................................................................

28

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KINERJA MASA LALU PERUSAHAAN, PERUSAHAAN KELUARGA,

SUKSESI CEO:
PENELITIAN DI INDONESIA
oleh:
Wulan Permatasari
NIM S. 411408040
ABSTRAK
Penelitian ini membahas kinerja masa lalu perusahaan terhadap penunjukan CEO
di perusahaan yang tercatat di bursa efek indonesia. Studi ini juga membahas pengaruh
dari komposisi anggota keluarga yang duduk di Dewan Direksi dan Dewan Komisaris
serta pengalaman sukseor bekerja di perusahaan yang sama pada pemilihan CEO baru di
perusahaan keluarga. Analisis yang dilakukan meliputi 148 perusahaan keluarga
Indonesia yang tercatat di bursa efek Indonesia dari data yang dikumpulkan melalui
ORBIS selama tahun 2006-2015. Regresi Logistik digunakan untuk mejawab pertanyaan
dalam penelitian. Hasil penelitian menunjukkan bahwa penunjukan CEO dipengaruhi
oleh kinerja masa lalu perusahaan dan jumlah anggota keluarga yang duduk di Dewan
Direksi. Kinerja buruk perusahaan di masa lalu akan mengakibatkan perusahaan keluarga
di Indonesia memilih CEO dari luar anggota keluarga dan semakin besar jumlah anggota
keluarga yang duduk di Dewan Direksi akan membuat perusahaan keluarga memilih
CEO dari dalam anggota keluarganya sendiri. Akan tetapi, jumlah anggota keluarga yang
duduk di Dewan Komisaris dan pengalaman suksesor bekerja di perusahaan yang sama
diketahui tidak memiliki pengaruh pada pemilihan CEO. Temuan ini menyiratkan bahwa
perekrutan CEO dipengaruhi oleh kinerja masa lalu perusahaan dan jumlah anggota
keluarga yang duduk di Dewan Direksi
Kata kunci: Perusahaan Keluarga, Suksesi CEO, Dewan Direksi, Dewan Komisaris,
Pengalaman Suksesor

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PAST PERFORMANCE, FAMILY BUSINESS AND CEO

SUCCESSION: THE CASE OF INDONESIA
by:
Wulan Permatasari
NIM S. 411408040
ABSTRACT
The study examines the firm past performance to the appointment of the new
CEO in Indonesian listed family owned business. Further, it also investigates the
influence of family member composition in Board of Directors and Board of
Commissioners also successor firm experience to the CEO succession. The analysis
encompasses 148 succession events of Indonesian listed family owned business from
ORBIS database for the years 2006-2015. The logistic regression methodology is
used to examine these research questions. The results show that the appointment of
the new CEO generally influenced by firm past performance and family member
composition in Board of Directors. Negative past firm performance will lead
Indonesian listed family owned business to choose CEO from outside the family
member and the more number of family members sitting on the Board of Directors
will lead family owned business to select the new CEO from inside family member.
However, family member composition in Board of Commissioners and successor
firm experience are found has no influence on CEO succession decision selection.
This finding implies that firm past performance and family member composition in
Board of Directors affect the CEO succession selection decision whether to choose
from inside family member or outside family member.
Keywords: Family Owned Business, CEO Succession, Board of Directors, Board
of Commissioners, Successor Firm Experience