Form Over Substance? Ineffectiveness of Good Corporate Governance in Family-Controlled Firms

Yuliani; Eddy Suratman; Giriati

doi:10.69725/jebi.v3i1.366

Authors

Yulia Department of Accounting Information Systems, Faculty of Informatics Engineering, Universitas Bina Sarana Informatika, Pontianak, Indonesia 78124
Eddy Suratman Department of Economic Development, Faculty of Economics and Business, Universitas Tanjungpura, Kota Pontianak, Indonesia 78115
Giriati Department of Economic Development, Faculty of Economics and Business, Universitas Tanjungpura, Pontianak, Indonesia 78115

DOI:

https://doi.org/10.69725/jebi.v3i1.366

Keywords:

Good Corporate Governance, Family Ownership, Institutional Decoupling, Corporate Performance, Emerging Markets

Abstract

Purpose — This study examines whether family ownership concentration explains why Good Corporate Governance (GCG) mechanisms may fail to improve financial performance in listed non-financial firms operating within a concentrated-ownership environment.

Design/methodology/approach — Using panel data, ultimate family ownership is classified through an internationally established voting rights threshold. Interaction models assess whether family control alters the relationship between formal governance structures and accounting performance, with alternative specifications and robustness procedures used to evaluate the stability of the results.

Findings — Formal governance compliance has no significant direct relationship with financial performance, and this finding remains stable across alternative specifications. The moderating role of family ownership is directionally consistent with a weakening effect but is not robustly significant. Family-controlled firms also exhibit substantially weaker formal governance structures than non-family firms without a corresponding performance penalty.

Originality/value — This study integrates principal–principal agency theory with institutional decoupling theory to explain why formal oversight mechanisms may remain detached from substantive control in concentrated-ownership markets. Its population-level classification of ultimate ownership extends the “form over substance” thesis from a family-firm-specific phenomenon to a systemic characteristic of governance regimes dominated by controlling shareholders.

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Author Biographies

Yulia, Department of Accounting Information Systems, Faculty of Informatics Engineering, Universitas Bina Sarana Informatika, Pontianak, Indonesia 78124

Yulia is a lecturer at Universitas Bina Sarana Informatika and a doctoral candidate in the Doctoral Program in Management Science (Program Doktor Ilmu Manajemen) at Universitas Tanjungpura, with a major in financial management. Her research interests include corporate governance, capital structure, earnings management, and the financial performance of publicly listed companies.
Eddy Suratman, Department of Economic Development, Faculty of Economics and Business, Universitas Tanjungpura, Kota Pontianak, Indonesia 78115

Prof. Eddy Suratman is a professor of development economics at the Faculty of Economics and Business, Universitas Tanjungpura. He is currently also active as an expert advisor and serves as a commissioner at Bank Kalbar.
Giriati, Department of Economic Development, Faculty of Economics and Business, Universitas Tanjungpura, Pontianak, Indonesia 78115

Prof. Giriati is a professor of financial management at the Faculty of Economics and Business, Universitas Tanjungpura. She is currently active as an expert advisor and a certified assessor.

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