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All Journal MABIS: Manajemen dan Bisnis International Journal of Accounting & Finance in Asia Pasific
Hermeindito Hermeindito
Universitas Ciputra
Decision Sciences, Operations Research & Management Economics, Econometrics & Finance Social Sciences

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Revisiting the relationship between leverage and firm value: does managerial ownership matter? Hermeindito Hermeindito; I Wayan Nuka Lantara
Manajemen dan Bisnis Vol 25, No 2 (2026): July 2026
Publisher : Department of Management - Faculty of Business and Economics. Universitas Surabaya.

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.24123/mabis.v25i2.1080

Abstract

This study aims to revisit the role of managerial ownership (MOWN) on the relationship between leverage and firm value. This study develops a non-monotonic model to test the managerial entrenchment hypothesis regarding the substitution of leverage and managerial ownership, and its impact on firm value. This study uses a sample of 108 manufacturing firms listed on the Indonesia Stock Exchange from 2014 to 2018, with a total of 540 firm-years. Using a weighted two-stage least squares, this study finds that the relationship between leverage and firm value is inverted N-shaped in firms without MOWN, and convex asymmetry in firms with MOWN. The first negative slope is greater than the subsequent negative slopes in firms without MOWN, indicating that underinvestment and managerial entrenchment issues are more sensitive than the trade-off between debt tax shield and default risk. Conversely, firms with MOWN are more directed towards the issue of trade-off theory. Firms with MOWN have lower performance than firms without MOWN, which implies that there is a critical problem in the selection of executives based on ownership structure, rather than on professional competence and skills.
Ownership Type and Political Risk Transmission: Evidence from Indonesian Equity Markets Priscilia Limadinata; William Santoso; Hermeindito Hermeindito
International Journal of Accounting and Finance in Asia Pasific (IJAFAP) Vol 9, No 2 (2026): June 2026
Publisher : AIBPM Publisher

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.32535/ijafap.v9i2.4568

Abstract

Political shocks can be transmitted asymmetrically across firms, depending on their ownership structure, while aggregate indices, such as the Jakarta Composite Index (JCI), may mask divergent firm-level reactions. This study examines whether ownership type (State-Owned Enterprises (SOEs) versus private firms) moderates political risk transmission to stock returns and conditional volatility in the Indonesian equity market. Employing a quantitative event study with GARCH (1,1) volatility modeling, this study analyzes 46 firms across four political shocks in 2025 using a 2 x 2 framework (domestic vs. international shocks x ownership type). Results show that domestic political shocks generated significant positive CAR for SOEs (mean = 4.67%, t = 1.893, p = 0.036), consistent with mean-reversion. For international shocks, a significant episode x ownership interaction emerged (F = 16.425, p 0.001, ?² = 0.157), while the ownership main effect on CAR was not significant at the 5% level (p = 0.054). Although international ???? values were positive, the between-group difference was insignificant (p = 0.922), and the overall volatility model showed no ownership, shock-type, or interaction effects (F = 0.222, p = 0.881). These findings suggest that political risk in Indonesia is transmitted primarily through return direction rather than ownership-specific volatility amplification.
Co-Authors I Wayan Nuka Lantara Priscilia Limadinata William Santoso