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Therefore, by complying with what Fama and Jensenargued, family involvement contribute to an alignment of interest between agent and principal and
consequent fewer agency problems Fama Jensen, 1983. In addition, the desire of protection of family name and long term focus are characteristics of family stewards.
In order to describe a company as family owned, the family must own at least 50 of its shares owned by the family, confirmedly with Bennedsen et al.
requirements in their study of family firms in Denmark Bennedsen, Nielsen, Wolfenzon,2004. According to Salloum Charbel, Bouri Elie and Samara Georges
2013, the indicator of family involvement is divided into: a. Family ownership amount of shares owned by family member in the firm.
b. Family’s ManagerDirector Proportion of family managers in the firm.
4. Firm Performance
Firm performance, which is often associated with share price, is investors perceptions of company. The higher price of share, the higher value of the company
Fakhrudin and Sopian, 2001. Value of the company commonly indicated by the price to book value, which is based on the level of market confidence the companys
future prospects Soliha and Taswan, 2002. In fact, no all companies want high share prices because they are afraid their share cannot be sold or cannot attract
investors to buy it. It is why the share price should be made optimally, the stock
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price should not be too high or too low. Share price that is too low can be bad for the companys image in the eyes of investors.
According to Keown et al 2004, there are quantitative variables that can be used to estimate the value of companies, among others:
a. Book value The book value is total assets of balance sheet minus existing liabilities or
owners of capital. Book value does not count overall the market value of a companys because the calculation of book value based on historical data of
company’s asset. b. The market value of the company
The market value of the stock is an approach to estimate the net value of a business. If the shares are registered in the stock exchange and widely traded
securities, the value approach can be built based on market value. Value approach is the most commonly used approach in assessing large companies, and this value can
change rapidly. c. Value of appraisal
The company based on independent appraiser would allow a reduction in the goodwill if the asset price firm increased. Goodwill is generated when the value of
the purchase of the company exceeds the book value assets. d. Value of expected cash flows
This value is used in the assessment of merger or acquisition. The present value of the cash flows that have been specified maximum will be and should be paid
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by companies targeted Target firm, the initial payment can, then, be deducted to calculate net value from the merger. The present value is the future free cash flows
that will come. The long term goal of the company is to optimize the value of the company
Wahyudi and Pawestri, 2006. Increasing the value of a company can describe well by owners, so owners of the company will encourage managers to work harder by
using a variety of incentive to maximize firm value. Suharli 2006 stated that shareholder value will increase if the value of the
company increase too that is characterized by a high rate of return on investment to shareholders. Values are measured from the fair market value of the share price. For
companies that have gone public the company determined the fair market value of the mechanism of demand and supply in the market, which is reflected in the listing
price. The market price is a reflection of management decisions and policies. One alternative used in assessing the value of the firm is to use Tobins Q.
This ratio was developed by James Tobin 1967. This ratio is considered to provide the best, because it can explain the various phenomena in corporate activities such as
the cross sectional differences in investment decision-making and diversification, the relationship between management ownership and firm value Sukamulja, 2004. This
ratio is a valuable concept because it shows the current estimates of the financial markets on the value of the return on each dollar of investment Herawaty, 2008.
The greater the value of Tobins Q ratio indicates that the company has good growth prospects. This can occur because the larger the market value of the assets of the
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company, the greater the willingness of investors to spend more sacrifices to own the company. According Brealy and Myers 2000 in Sukamulja 2004 states that
companies with a high Q value brand image usually has a very strong company, while the company has a low Q values generally are in a highly competitive industry
or the industry began to shrink.
B. Previous Research 1. Impact of Corporate Governance on Performance of Firms: A Case Study of
Cement Industry in Pakistan Khaliq Ur Rehman Cheema and Muhammad Sadat Din, 2013
This research paper throws light on the relationship between the corporate governance and Firm financial performance in Cement industry of Pakistan. This
study gives attention to three variables which include board Size, Family controlled firms, and CEO duality. For the purposes of this study, panel data set covers data of
fifteen companies of the cement industries of Pakistan including family and no- family from the period of 2007 to 2011. This study constructs a regression model for
carrying out empirical analysis. This study use independent variable, they are board size, duality and family control firm and dependent variable as firm performance.
Firm’s performance is measured through return on equity, return on assets, and earnings per share, debt to equity and current ratio. The result that CEO duality has
impact on firm performance. Board size has positive relation to cement industry
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performance in Pakistan. Positive relationship between corporate governance and firm performance has been observed Cheema and Din, 2003.
2. Impact of family involvement in ownership managementand direction on financial performance of the Lebanesefirms Salloum Charbel, Bouri Elie,
Samara Georges, 2013.
This research is purposed to understand better how family involvement in ownership management and direction affects the financial performance of the
Lebanese companies. In order to authenticate our hypotheses, we collected primary data by using a quantitative method. In fact, we performed an inquiry by surveying 75
Lebanese companies listed companies in the Beirut Stock Exchange 2012 through a questionnaire formed by closed and semi-open questions and modulators. Research
model parameters estimated using statistical package for the social science using Spearman test of correlation through the SPSS program. This study use independent
variable, they are family involvement in ownership management and entrenchement and asymmetric altruism, and dependent variable using return on asset ROA and
earning before interest taxes EBIT. While finishing the empirical study, we concluded that family involvement in ownership and management has a positive
relationship with the financial performance of the Lebanese company. Moreover, issues like entrenchment and asymmetric altruism did not prove to have a significant
relationship with the financial performance. The essential reason to the results previously stated is that family managers in Lebanon act as stewards by considering
