Abstract
The aim of this study is to investigate the impact of the Family Commissioners Board (FCBs) on the performance of Indonesian companies that utilize debt as a control mechanism. Both bank and non-bank debt are among the aspects investigated. The GMM-First Difference two-step estimation method was used to examine 121 family-owned companies with unbalanced panel data between 2009 and 2018. Several findings resulted from this study. Firstly, it revealed that having family representatives on commissioner boards had a negative effect on company performance. This demonstrated that FCBs used company assets to favor family shareholders at the expense of minority shareholders, thereby indicating entrenchment behavior. Secondly, in this study, debt was found to moderate the impact of the FCB on company performance. Debt prevents the FCB from becoming entrenched which improves the company's performance. The study's final finding proved that the FCB’s entrenchment behavior toward non-family shareholders does not differ in relation to groups of companies with bank debt and those with non-bank debt. The conclusions of this study have policy implications for the relevant authorities within Indonesia in terms of family-owned company governance mechanisms. It is vital to identify an adequate mechanism for appointing family members to the board of commissioners that would protect all shareholders' interests.
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