Theoretical Framework THEORETICAL FRAMEWORK

45 problem. One important method capable of resolving such a conflict of interest between shareholder and manager is to give shares to the manager. By resolving the conflict of interest between the outside shareholder and manager, administrative cost will be reduced and firm value will be increased. Yammeesri and Lodh’s 2004 study on 240 public firms in Thailand shows that family ownership is positively associated with firms’ return of assets and net income-to-sales. Demsetz and Lehn 1985 has also one of the negative impact of strukutur concentrated ownership in the family may also have cost negative impact that does not appear in the form of money and do not reduce profit corporation or non-material benefit acquired when the company owners family has no control, examaple is founder of the company will be very happy if the company he founded led by one of future generation. H 3 : There is positive influence between family ownership towards firm performance 4. Family’s ManagerDirector and Firm Performance Usually family businesses have high involvement and long tenure in management. Thus, by their high involvement they will succeed at having a better sense of recognition of uncertain-ties and opportunities and also by establishing a long term focus Zahra, 2005. In the study of more than 1600 Western European companies, Maury revealed that constant and active control by family executives was linked to higher profits, justified by the mitigation of agency problems between 46 principals and agents Maury, 2006. Charbel, Elie and Georges 2013 found that moderate positive relationship between family managers in the business. In companies that have ownership structure concentrated to the family will usually happen merger between functions management and control of the company. This incorporation can lead making optimal investment decisions that only benefit detrimental to the family but due to minority shareholders divergence of interests between the two types of shareholders Fama and Jensen 1983. In addition the company is experiencing family entrenchment effect, the conditionwhere management companies have not followed the governance and control corporate control mechanisms Berger, Ofek, and Yermack; 1997, may have insesntif to take advantage of a personal nature that is detrimental which means that once the company took over the rights of holders minority shares Facio et al , 2002. H 4 : There is positive influence between family’s managers towards firm performance 47

CHAPTER III RESEARCH METHODOLOGY

A. Scope of Research

This research use quantitative method by using eviews and SPSS application. The scope of the research is the annual report of all family owned business listed in Indonesian Stock Exchange IDX within 2010 - 2013. This research will examine the influence of good corporate governance and family involvement towards firm performance in family firm. Good corporate governance proxies by board of director BOD and size of committee audit CA while family involvement proxies by family ownership FO and family directormanager FDM and firm performance measure by Tobin’s Q.

B. Sampling Method

Sampling method is kind of method that take data from population. Sample is a part of the number, and characteristic possesed by the population. Research will not take all the populations, because due to limited funds, manpower and time. So, sample can represents the population Sugiyono, 2009:5. The sampling method used in this research is purposive sampling method. In purposive sampling this research use judgemental sampling by spesific criteria Sekaran, 2009:79. The sample specific criteria in this research are as follow: 1. The company has published its annual report publicly within period 2010-2013.