Indian Journal of Economics and Development: Forthcoming Issue

The Influence of Cash Flow Right, Control Right, and Cash Flow Right Leverage of the Controling Shareholders on Firm Value in Indonesia

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Ardi Gunardi * and Ika Utami Widyaningsih

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Indian Journal of Economics and Development
Year : 2017, Volume : 13, Issue : 2
First page : ( 321) Last page : ( 326)
Print ISSN : 2277-5412. Online ISSN : 2322-0430.
Article DOI : 10.5958/2322-0430.2017.00182.2

The Influence of Cash Flow Right, Control Right, and Cash Flow Right Leverage of the Controling Shareholders on Firm Value in Indonesia

Gunardi Ardi1,*, Widyaningsih Ika Utami2

1Universitas Pasundan, Faculty of Economics and Business, Jalan Tamansari 6–8, Bandung, 40116, Indonesia

2Universitas Sultan Ageng Tirtayasa, Faculty of Economics and Business, Serang, Banten, Indonesia

*Corresponding author’s email: ardigunardi@unpas.ac.id

JELCodes: C23, G32

Online published on 20 June, 2017.

Abstract

Ownership concentration in public companies allows agency conflict between the controlling shareholders and the minority shareholders. The concept of ultimate ownership is able to identify the controlling shareholders of a public company through separation of cash flow right, control right, and the deviation of these two rights. A deviation between cash flow right and control right indicates the occurrence of expropriation. This research is aimed at verifying the phenomenon of separation of cash flow right and control right over the possibility of expropriation by the controlling shareholders on other shareholders by examining the effect of separation on firm value. This study uses data panel regression to analyze the data of 83 publicly traded companies listed on the Indonesia Stock Exchange (BEI) in 2007–2010. The sampling method of this research is purposive sampling method. The findings indicate that the cash flow right positively influences firm value. On the other hand, control right and cash flow right leverage have no relationship with firm value.

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