Ghassani Awanis, - and Mohammad Nasih, - (2020) Corporate performance, political connection, family firms and CEO turnover in Indonesia. Journal of Security and Sustainability Issues, 9. pp. 171-185. ISSN 2029-7017, eISSN 2029-7025

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Abstract

This paper examines relations between company performances, political connection of CEO, political connection of head of commissioner and family firms to CEO turnover. This study uses 1,156 samples of listed firms in Indonesia Stock Exchange from all industries, except financial, during the period of 2011-2017. Ordinary Least Square (OLS) regression is used, and ROA as well as family firms are found to decrease the likelihood of CEO turnover, while Tobin’s Q has no significant effect to CEO turnover. It shows that only short-term performance and ownership are taken into account to make decision regarding CEO turnover, while long-term performance is not affecting the decision significantly. In addition, both CEO and head of commissioner’s political connection are found to enhance the likelihood of CEO turnover regardless of their differences in roles and tasks. This research findings implies that one of the ways companies adapt is by choosing to appoint CEO with political connection that bring the most benefit for firms at a particular time in a complex political environment such as Indonesia, hence the increased turnover rate. This study helps to explain the implication of performance, upper-management political connection, and family-firm ownership that may influence to the event of CEO turnover in Indonesia.

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