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2. Hausman test Hausman test is a statistical test that became the basis of the considerations in
choosing a model FE or RE. The test is performed with the following hypothesis: a. Ho: RE model
b. H1: FE model Basic rejection of the null hypothesis is by using chi-square statistical considerations.
Hausman test can be done in programming eviews as follows: if the result of the significant Hausman test Hausman probability α, the null hypothesis is rejected
and the FE method is used.
3. t-Test
T-test shows how much effect of every single dependent variable toward the dependent variable. The hypothesis for t-test is :
H = the independent variable are not influence the dependent variable
H
1
= the independent variable are influence the dependent variable H
is rejected if the t
statistic
t
table
or if the probability of t
statistic
α. The significance level that use is 5 0.05.
4. F-test
F-test used to measure, do the independent variables simultaneously influence the dependent variable. The hypothesis for this test is :
H = the independent variable are simultaneously not influence the
dependent variable
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H
1
= the independent variable are simultaneously influence the dependent variable
H0 is rejected if F
statistic
F
table
or if the probability of F
statistic
α.
5. Adjusted R
2
Adjusted R
2
is the determination coefficient that explained how much the dependent variable variant described by the model in the whole. The value of
adjusted R
2
is in between 0 and 1. More closer the value of R
2
to the 1, it means that the independent variables perfectly influence the dependent variableor with the other
word, the model can describe the variant of dependent variable well.
E. Definition of Operational Research
Variable operational research is a concept that had variation point applied in a research and meant to ensure, so variable that wanted to be researched clearly could
be seen. As for variable that is meant as follows: 1. Independent
The independent variable is the type of variables that explain or influence another variable or variables suspected as the caue of the dependent variable
Indriantoro and Supomo, 2009: 64. The independent variables used are:
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a. Board Size Alternatively, board size increases according to company performance as
troubled firms are more likely to add directors to increase their monitoring capacity. However, Linck et al 2008 provides evidence that smaller boards are not necessarily
better than larger boards. We measure board size by the total number of executive and non-executive directors of the board Weterings, Josephus P et al, 2011
Board Size = Total number of board director
b.
Size of Audit Committee
An audit committee can improve quality of a firm’s financial reports, as firms with established audit committees are more likely to have reliable financial reporting
McMullen 1996. The total member of director must be adjusted with the complexity of firm, but still considering the effectiveness of decision making. According to Gill
and Obradovich 2012 the size of audit committee will be measured by total number of audit committee members.
c. Family Ownership Family firms usually represent the characteristic of being founded by a family
entrepreneur owning most shares in the company. When at the start-up phase they have few numbers of employees, where informal behavior is adopted along with a
centralized decision making power, and fewer hierarchical levels. Founders of family firms will feel that they have more direct control over the behavior of employees, as
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well as the ability to directly export cultural and ethical guidelines to the company through their own behavior Charbel 2013. It is measured by looking at the
composition or percentage of ownership owned by family. Family Ownership = of shares owned by family
d. Family’s DirectorManager
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 uncertainties and opportunities and also by establishing a long term focus Zahra, 2005. Several empirical studies have backed the vision that the
involvement of the family in business will foster its financial performance. 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 principals and agents Maury, 2006.
Family’s directormanager measure by total number of family’s managerdirector.
2. Dependent Dependent variable is type of variables that explained or influenced by other
variables or variable expected as a result of the independent variable Indriantoro and Supomo, 2009:159
. Dependent variable used in this research is firm value. Tobin’s Q is used to measure firm value. According to Ma Tian 2009, Tobin’s Q has the
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advantage of reflecting the firm’s current value and future profitability potential. According to Vinola Herawati 2008, firm value can be measured by Tobin Q which
is formulated as: Tobin’s Q =
Where: Tobin’s Q: Firm Value MVE: Market Value Equity
D: Liabilities Book Value BVE: Book Value Equity
Market Value Equity MVE is obtained from the multiplication of ending share price with the number of outstanding shares. Book Value Equity BVE is
obtained from the difference between total assets to total liabilities
Table 3.1 Summary of variable operational research
No Variable
Measure Scale
1 Board Size
Total number of board director
Ratio 2
Size of Audit Committee
The total number of audit committee members
Rasio 3
Family Ownership of shares owned by
family Rasio
4 Family’s
DirectorManager The number of Family’s
ManagerDirector Rasio
5 Firm Value
Tobin’s Q = Rasio
