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Do Family Firms Tend to Issue Share-Based Compensation Due to Better Governance than Non-Family Firms?

Anastasia Zulfa, Yunieta Anny Nainggolan


Abstract. The objective of this study is to explain and provide comparation regarding the issuance of share-based compensation in form of Employee Stock Option Plan (ESOP) in publicly listed family and non-family firms in Indonesia. Previous research regarding the issuance of ESOPs proved that strong corporate governance influences the firm to issue compensation in order to mitigate agency conflict which often occurs in firms with dispersed ownership. However, in a concentrated ownership such as family-owned firms with family members in board members or even family CEO already have their interests aligned. Therefore, issuance of ESOP in family firms may fall to two purposes: rent extraction or long-term value maximizing. A collection of companies listed in Indonesian Stock Exchange issued ESOP during 2013-2018 period is taken as sample. Using panel data regression, corporate governance practices in board meetings frequency has positively affect the grant of ESOPs regardless family or not. In listed family firms’ environment, board meetings and independent commissioners each have linear relationship to the grant of ESOP.

Keywords: Corporate Governance; ESOP; Family Firms


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