Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review
This paper looks at managerial diversion and agency theory and how both arguments may be applied to describe the governance practices and performance of state-owned enterprise companies in Indonesia. Managers are the main focus of the approaches, on the assumption that managers tend to expropriate t...
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Sciedu Press
2020
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2-s2.0-85096295622 Jahja J.; Mohammed N.F.; Mohamed N.; Lokman N. Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review 2020 International Journal of Financial Research 11 5 10.5430/ijfr.v11n5p510 https://www.scopus.com/inward/record.uri?eid=2-s2.0-85096295622&doi=10.5430%2fijfr.v11n5p510&partnerID=40&md5=b36dd031ab99076daf302e6d47848f01 This paper looks at managerial diversion and agency theory and how both arguments may be applied to describe the governance practices and performance of state-owned enterprise companies in Indonesia. Managers are the main focus of the approaches, on the assumption that managers tend to expropriate the firms’ and shareholders’ value for their own benefit instead of looking for ways to maximize shareholders’ value and fulfill their stakeholders’ needs. Indonesia is selected because it has the highest number of State-Owned Enterprise (SOE) companies among the ASEAN countries. The government holds more than 51 percent of the shares and has a unique governance structure with two-tier boards to manage and run the companies. Besides, most of Indonesia’s SOE companies have a tight connection with Indonesia’s political party. With these characteristics, the agency problem in Indonesia's SOE companies is more prevalent compared to other listed SOE companies. The managerial diversion, which is linked to corruption, might be the principal critical factor that hinders SOE companies from performing well. Thus, even with the introduction of a good corporate governance score by the Indonesian government, which is imposed on SOE companies, it may not be able to improve the overall financial performance of SOEs as well as governance practice in the companies. This paper's objective is to review and examine prior literature on corporate governance and managerial diversion from the perspective of state-owned enterprise companies in Indonesia. © (publication year), (publisher). All rights reserved. Sciedu Press 19234023 English Article All Open Access; Gold Open Access |
author |
Jahja J.; Mohammed N.F.; Mohamed N.; Lokman N. |
spellingShingle |
Jahja J.; Mohammed N.F.; Mohamed N.; Lokman N. Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review |
author_facet |
Jahja J.; Mohammed N.F.; Mohamed N.; Lokman N. |
author_sort |
Jahja J.; Mohammed N.F.; Mohamed N.; Lokman N. |
title |
Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review |
title_short |
Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review |
title_full |
Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review |
title_fullStr |
Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review |
title_full_unstemmed |
Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review |
title_sort |
Corporate Governance, Managerial Diversion, and Indonesian State-Owned Enterprises: A Literature Review |
publishDate |
2020 |
container_title |
International Journal of Financial Research |
container_volume |
11 |
container_issue |
5 |
doi_str_mv |
10.5430/ijfr.v11n5p510 |
url |
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85096295622&doi=10.5430%2fijfr.v11n5p510&partnerID=40&md5=b36dd031ab99076daf302e6d47848f01 |
description |
This paper looks at managerial diversion and agency theory and how both arguments may be applied to describe the governance practices and performance of state-owned enterprise companies in Indonesia. Managers are the main focus of the approaches, on the assumption that managers tend to expropriate the firms’ and shareholders’ value for their own benefit instead of looking for ways to maximize shareholders’ value and fulfill their stakeholders’ needs. Indonesia is selected because it has the highest number of State-Owned Enterprise (SOE) companies among the ASEAN countries. The government holds more than 51 percent of the shares and has a unique governance structure with two-tier boards to manage and run the companies. Besides, most of Indonesia’s SOE companies have a tight connection with Indonesia’s political party. With these characteristics, the agency problem in Indonesia's SOE companies is more prevalent compared to other listed SOE companies. The managerial diversion, which is linked to corruption, might be the principal critical factor that hinders SOE companies from performing well. Thus, even with the introduction of a good corporate governance score by the Indonesian government, which is imposed on SOE companies, it may not be able to improve the overall financial performance of SOEs as well as governance practice in the companies. This paper's objective is to review and examine prior literature on corporate governance and managerial diversion from the perspective of state-owned enterprise companies in Indonesia. © (publication year), (publisher). All rights reserved. |
publisher |
Sciedu Press |
issn |
19234023 |
language |
English |
format |
Article |
accesstype |
All Open Access; Gold Open Access |
record_format |
scopus |
collection |
Scopus |
_version_ |
1809677599589269504 |