The purpose of this paper is to investigate the endogeneity effect of state ownership on firm value in Indonesia.Design/methodology/approachUsing a sample of 139 Indonesian non-financial listed companies from 2009 to 2013, this study uses two-stage least square (2SLS) methods.FindingsThe results of 2SLS show that state ownership as “continuous measure, dummy variable and after adjusting the outliers” are negatively and significantly influenced firm value, implying that state ownership tends to lower firm value. Moreover, the results also show that U-shaped effect of state ownership with firm value, implying that the size of shareholders by state increases, firm value initially decreases and then increases.Practical implicationsThe study intends to provide the shareholders, managers and investors with clear guidance before their investment decisions.Social implicationsThis paper provides evidence that the agency costs may increase in firms with state ownership share.Originality/valueThis is the first paper contributes to the corporate governance literature by investigating the endogeneity effect between state ownership and firm value using 2SLS method in Indonesia.
Journal of Asia Business Studies – Emerald Publishing
Published: Jan 10, 2020
Keywords: State ownership; Control variables; 2SLS; Firm value; Indonesia
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