International Journal of Financial and Investment Studies (IJFIS) DOI: 10.9744/ijfis.2.1.

17-30
Vol. 4 No. 1, April 2023: 17-30
e-ISSN 2745-3952

FAMILY OWNERSHIP MATTERS FOR INVESTORS

IN INDONESIA'S MINING COMPANIES
I Gusti Ayu Purnamawati1, Gede Adi Yuniarta2, Kadek Rai Suwena3,
Komang Krisna Heryanda4, Saarce Elyse Hatane5
1,2,3 Economicsand Accounting Program, Faculty of Economics, Universitas Pendidikan Ganesha
Jl. Udayana No 11, Singaraja, INDONESIA
4 Management Program, Faculty of Economics, Universitas Pendidikan Ganesha

Jl. Udayana No 11, Singaraja, INDONESIA

5Accounting Department, School of Business and Management, Petra Christian University

Jl. Siwalankerto121-131, Surabaya, INDONESIA

Corresponding author: [email protected]

ABSTRACT

This study aims to determine the effect of family ownership, financial performance, return on assets, return on equity,
liquidity, and capital structure on market value. Secondary data was obtained based on annual reports and financial
statements in mining companies listed on the IDX in 2016-2020 through Indonesia Stock Exchange (IDX). Data were
obtained from the Bloomberg database. The method used to collect samples is purposive and consists of 35 mining
companies in Indonesia. The panel data method was considered appropriate in this study, and multiple regression was
used to examine the data. The results show that total assets and return on assets positively affect market value. The ratio
of return on equity and liquidity in financial performance and capital structure has no significant effect on market value.
The existence of family ownership is favourable for a firm’s market value. The sample in this study was limited to the
manufacturing sector. This industry was chosen because its market value is quite volatile and family ownership is quite
large. On average there are 40% of the total observations are family-owned companies. The interesting findings in this
study are that family ownership does matter in gaining the investors’ attention.

Keywords: family ownership, firm size, Indonesia, market value, profitability.

INTRODUCTION

The company has various values that affect its growth, including nominal, market, intrinsic, book, and
liquidation. Market value can describe whether the company in its development has shown good performance
or vice versa. Companies with good performance will become the target of investors to invest and result in
an increase in the market value of the stock. Indonesia has the largest economic growth in Southeast Asia
and is one of the emerging markets in the world as its Gross National Income (GNP) is at a moderate level
(MSCI Inc., 2022); (Rahayu et al., 2021). Emerging market countries are countries with low to medium per
capita income levels. Its growth accounts for almost a large percentage of the global population and world
economy. In the future, Indonesia will become the locomotive of the global economy in the years to come.
Blessed with abundant natural resources and increasingly independent of foreign funding, Indonesia is likely
to be a key player in the future with moderate GDP growth per year. It will certainly give a positive signal to
each company's stock market value in Indonesia so that it can attract investors.

The company has a market value related to the ownership structure. One of the ownership structures owned
by each company is the ownership structure with a family ownership pattern. The pattern of family ownership
carried out, especially in public companies, has become commonplace. Family ownership for some people
is better able to produce the best performance, where the underlying thing is that companies with family
ownership patterns can provide investment decisions (Deephouse & Jaskiewicz, 2013) both short-term
investment and long-term investment with the maximum because the family has more specific knowledge
that is stronger in building their company. In addition, family ownership can minimize principal-agent problems
to align the interests of managers and shareholders (Halili et al., 2015). Managers can also be closely
monitored in managing company assets because family ownership must maintain family wealth which is the
company's strength. Family ownership can be interpreted as a controlling family with a percentage of equity
compared to total equity to determine the proxy for family ownership. A family controlling a company can be
seen from the relationship between individuals in the organizational structure, such as the CEO, chairman or
vice-chairman, and managers who have the same family name by blood or marriage with the largest
controlling shareholder. Quote (Amore et al., 2022) said that companies with family ownership patterns performed

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International Journal of Financial and Investment Studies (IJFIS), Vol. 4, No. 1, April 2023: 17-30

very well systematically compared to non-family companies or not based on family ownership; the performance
in question was specifically based on an economy where the company's economy continues to grow rapidly
because the activities and control of the business are directly held by the family, especially in equity shares.
During the COVID-19 pandemic, it is felt that companies with family ownership patterns are profitable
because the business is still strengthened by family wealth and does not reduce the company's market value.

The existence of investors has a big influence on the sustainability of a large company which can improve
the company's financial performance. It will be seen in good or bad condition in an annual report. In the report,
the company tries to attract investors by showing that the company does not only generate profits but can
maintain and increase profits and has profitable job prospects and promises (Thakur & Workman, 2016). It
has the effect of increasing the value of the company. It is important because the company's high value will
be followed by the prosperity of the shareholders (Rosada & Idayati, 2017). The rationale is that when more
investors buy company shares, the share price will increase, and the company market value will also
increase.

The market value indicates a high purchase price and is provided by the market so that you can choose the
company's assets and shares (Henrique et al., 2018). (Bushee & Miller, 2012) said that every company has
a provision in market value that is useful for determining the most likely selling price for each type of investor.
One thing that can determine is that assets, both current, fixed, intangible, and long-term investments show
how the company's assets are in each period. It makes managers strive to provide truly accurate information
to the capital market regarding assets (Puspitha & Yasa, 2018). It can provide a positive response from
investors that can accurately assess the price of shares issued in the market, and the information can be
explained in detail. One example is how companies consider whether an intangible asset will be treated as
an expense. Most companies will make it an expense. In contrast, the cost will make intangible assets an
expense that decreases capital and directly impacts company results related to profits and taxes (Glova &
Mrázková, 2018).

Assets usually have a component used as a reference in seeing the company's value, which is presented in
the form of a ratio. The profitability ratio is often used, referring to the ROA (Return on Asset). In addition to
ROA, profitability is also measured based on equity, namely the financial ratio ROE (Return on Equity). ROE
is very common and a relatively good performance measure among traditional measures (Nakhaei & Hamid,
2013). The next ratio also considered important in measuring firm value is liquidity. The company's ability to
meet short-term obligations requires the company to have cash or convert other current assets into cash—
the relativity of current assets to current liabilities (Khidmat & Rehman, 2014).

The optimal combination of debt financing and cost of equity can suppress WACC (Weighted Average Cost
of Capital) at the lowest level, thereby increasing the company value and market value to the maximum. The
effect can indirectly influence capital structure decisions, changing risk and desired rate of return (Brigham &
Daves, 2012). The capital structure theory shows that the WACC cost of equity can be expressed as a source
of financing whose value is higher than the cost of debt and deposits. This theory reveals that increasing
equity financing by issuing new equity will increase WACC (Rahman et al., 2018). Based on research
(Budhathoki & Rai, 2020), An increase in the amount of equity capital (minimizing the debt ratio) can reduce
WACC through efforts to increase public confidence and the ability to take risks in banks. Interest expense
can reduce tax payments for companies and substantially reduce WACC. Rationally, the high use of financial
leverage will lead to an increase in market value. An increase in the debt ratio will result in a decrease in the
company's market value.

LITERATURE REVIEW

Agency theory emphasizes problems that occur because of conflicts between agents and principals.
Currently, agency problems are not only focused on agents and principals but have included conflicts
between the interests of the majority and minority owners (Panda & Leepsa, 2017). The majority owner is the
owner or shareholder with the highest voting rights (Song et al., 2015), thus providing many opportunities to
make decisions that are very beneficial for themselves, even though this will limit the interests of minority
owners. Shareholders with minority ownership ultimately experience difficulties voicing their interests and
protecting the wealth that is their right (Armour et al., 2017). A family relationship in a family company will

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 Purnamawati: Family Ownership Matters for Investor in Indonesia’s Mining Companies

cause conflict because of differences in views between the founders of the company as principals and the
younger generation as agents in running a family company (Block, 2012). This agency problem always arises
and is faced by the state with companies with the concept of family ownership.

Spence introduced the signal theory in 1973. Companies often use signal theory to provide signals to users
of financial statements (Sharma et al., 2016); (Birjandi et al., 2015) by displaying the company's financial
performance each period, where the liquidity and profitability ratios are the most basic ratios that all investors
can read. The company's financial performance with wider disclosure will give a positive signal to
stakeholders and shareholders (Vitezić et al., 2012) and be interpreted by potential investors (Revelli &
Viviani, 2015); If the signal is good,, it will attract many investors and increase the market value.

In stakeholder theory, the company will carry out operational activities to benefit employees, shareholders,
creditors, consumers and the government (Brown & Forster, 2013). Companies must demonstrate
accountability and responsibility broadly and not only to shareholders (Pless et al., 2012). Edward Freeman
introduced stakeholder theory in 1984, which is useful in determining how stakeholders can contribute greatly
to the presentation of the annual report (Torelli et al., 2020). Financial statements present a capital structure
based on how stakeholders can provide returns to shareholders, pay debts, and refinance their business in
different ways (Suto & Takehara, 2016). Achievement in the best performance of stakeholders will increase
the company's value.

Stewardship theory, introduced by Donaldson and Davis in 1989, explains that managers work for the
common good. If these interests are not in line with the owner's, the manager tries to follow the owner's
procedures without going against them (Aßländer et al., 2016). Stewardship theory in a family company has
a good impact because family members will act as servants as the company's controller; this makes them
think more about continuing the company and developing closer relationships with other stakeholders and
shareholders (Adendorff & Halkias, 2014). This family ownership must also consider what other shareholders
want, such as getting dividends according to their expectations. It will support the stewards in successfully
achieving the organization's goals, namely increasing the company's market value.

Market Value can be defined as the price of goods or securities indicated by a market offer, i.e. the price at
which additional goods can be sold or purchased (Xia et al., 2016). The market value is determined by the
last sale or the appraisal agency; the market value constantly fluctuates when there is hot news and will often
change throughout the day. (Kanwar & Hall, 2017) defines that the prosperity of each shareholder is usually
maximized by maximizing the increase in the company's capital market value above the value of the paid-up
capital by shareholders. This increase in the company is commonly referred to as Market Value Added
(MVA), as a total calculation of the company's performance originating from various investment results. MVA
shows the total of all claims on the company's capital and the addition of debt and equity market value (Ahmad
et al., 2019).

Companies with family ownership patterns are recognized as companies that are sheltered in one family
scope where the founders are family members either by blood or marriage ties, in their positions as directors,
CEOs or others or owners who own at least five per cent of the company's equity. (Sener, 2014) defines that
the largest shareholder must own more than twenty per cent of the voting rights for the company, proposed
as family ownership. The use of the final percentage owned by the family as an assessment of its ownership.
In family ownership of a company, ownership and management are important in reducing or eliminating
agency problems, but minority shareholders can certainly be affected. Share ownership by managers is
expected to prevent moral hazard; workers will try to work more productively for shareholders' welfare and
increase company value (Khanifah et al., 2020). Research by (Sienatra et al., 2015) confirms that share
ownership by managers in companies will increase market capitalization. The stock's market value can make
the value of the company formed to provide investment opportunities. This space becomes a positive signal
for future growth so that the increase in stock prices becomes a proxy for company value.

One component of financial performance is assets, where assets are part of the company's assessment of
increasing market value. This asset becomes the company's wealth in its operational activities (Owolabi &
Obida, 2012). However (Rahman & Hossain, 2020) said that the presentation of this value was deemed to
be less reflective of the true value of fixed assets. Hence, it was necessary to revaluate fixed assets. The next

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International Journal of Financial and Investment Studies (IJFIS), Vol. 4, No. 1, April 2023: 17-30

component of non-current assets is intangible assets. These assets do not have a physical form and become
future economic benefits for the company due to past transactions (Okoye et al., 2019). The last component
of non-current assets is a long-term investment made in the past and present and is useful for the growth of
the company's wealth. At the end of the period, this total asset measures how big or small a company's
financial statements are (Dahmen & Rodríguez, 2014).

Unlike the case with assets, some of the information in financial performance measures the company's
finances in a period, one of which is ROA. As a proxy for profitability ratios, ROA explains the company's
ability to generate profits from sales, total assets, and own capital. An increase in the profit ratio results in
better management (Angelia & Toni, 2020). In addition, ROE also represents a ratio in financial performance
that measures the ratio of net income to book value of equity (Mohammad Alipour & Pejman, 2015). Liquidity
ratios and performance are effective assessments of the company's sustainability in achieving increased
profitability, reducing input requirements, and achieving strategic advantages in fluctuating economic
situations (Veronika et al., 2014).

The capital structure forms the basis for developing a theoretical framework with various influencing factors,
including possible bankruptcy costs, agency costs, and even packing orders (Roshaiza & Azura, 2014) states
that the existence of bankruptcy costs, financial difficulties and favourable tax treatment through interest
payments will lead to an optimal capital structure thinking and optimizing firm value or minimizing the total
cost of capital. The appropriate cost of capital for all decisions is the WACC components. The cost of capital
for investors is divided into equity costs, in this case, owners or shareholders who invest in equity, and debt
costs are creditors (banks and bondholders) who invest in debt capital (Lehutová et al., 2013). WACC ratio
is used to make company decisions regarding debt or equity to purchase new assets (Goldberg & Prottas,
2017); (Berry et al., 2014). The implementation of WACC is in capitalizing net cash flows in one year, but it
can also assess the control or interest position of minority shareholders (Pratt & Grabowski, 2014).

Hypothesis Development

The results of previous relevant research reveal the influence of family ownership on market value because
it will make the company have good performance and minimize conflicts between agents and principals.
According to research (Juwita, 2019), family ownership positively affects firm value. Managers of companies
under family control are considered more responsible for stakeholders' interests in optimizing profits and
public trust. It will indirectly increase the company's value and affect the market value. Similar to research by
(Anderson et al., 2012), characteristics in family control and ownership show a positive relationship in sales
activity compared to non-family firms. However (Malelak et al., 2020) stated that family ownership does not
significantly affect firm value.
H1: Family ownership affects market value.

In general, the management carried out by the company's management is related to efforts to improve
shareholders' welfare by maximizing share prices. One of the financial performance components is total
assets (Shygun et al., 2020). When there are more current assets in a company, the company prefers to use
debt in fulfilling its financing activities. Still, if there are more non-current assets, they will use their capital to
fulfil the company's financing activities. Companies with large total asset ownership will find it easier to obtain
loans because they are collateral to increase the financing of operational activities (Alipour et al., 2015).
Research by (Nyamasege et al., 2014) and (Setiadharma & Machali, 2017) reveal the influence of asset
structure in a positive and significant direction on firm value. The company provides good information or
signals to investors. Fixed assets are also stated to positively affect the company value because when the
company goes bankrupt, these assets are less risky for investors (Listiani & Supramono, 2020).

Total assets can be seen in financial performance and can be seen based on the ratios presented. The ratio
that potential investors most easily understand is the ratio of profitability and liquidity. As explained, when
profitability is high, it shows that the prospect of a company is quite good. It indicates that the company
managed to record an increase in profits, the company has good performance and can increase its stock
price. This statement is consistent with (Terpstra & Verbeeten, 2014); (Husna & Satria, 2019), which state
that the profitability ratios using ROA measurement significantly affect firm value to market value.

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 Purnamawati: Family Ownership Matters for Investor in Indonesia’s Mining Companies

Meanwhile, (Ichsan et al., 2021) state that ROA affects financial performance negatively but not significantly.
Research (Rosada & Idayati, 2017) found that profitability significantly affects firm value as measured by the
ROE proxy. The company's value can be seen from its liquidity and the company's ability to meet its short-
term obligations. Research by (Massie et al., 2018) and (Almajali et al., 2012) found that liquidity positively
influences firm value.
H2a: Return on assets affects market value.
H2b: Return on equity affects market value.

The trade-off theory emphasizes that the bank's interest expense will also increase by increasing the use of
debt. It will have difficulty fulfilling its financial obligations to the bank on time. It will affect the rate of return on
capital and increase the cost of bankruptcy, which causes WACC to increase and affect the decline in the
company's market value. The WACC cost of equity is presented concerning the rate of return demanded by
the owner or shareholder through exposure observation (Bojňanský et al., 2012). Meanwhile, the WACC cost
of debt is an important capital component because it can see data on capital budgeting, performance
measurement and firm value (Brealey et al., 2016). Research by (Bozec et al., 2014) states that companies
with higher WACC should have lower scores. A slightly higher WACC is unlikely to jeopardize a healthy
company managed by an entrepreneur who implements and follows a sound long-term strategy. This ratio
is considered comprehensive because it calculates the average of all sources of capital (Asad et al., 2019).
So, in this case, a high stock price also makes the company value high and increases market confidence in
the company's current and future performance. Research conducted by (Cao et al., 2015) shows that the
cost of equity improves the company's reputation with information asymmetry about the quality of the
company and (Aldamen et al., 2015) also state a positive effect on the cost of debt by considering the risk
faced.
H3a: WACC cost of equity affects market value.
H3b: WACC cost of debt affects market value.

METHODOLOGY
Table 1. Sample presentation summary
Sample criteria Number of observations
Total mining company 41
Companies registered in 2016-2020 (6)
Companies Number as population 35
Total period (in years) 5
The number of samples used in the study (35 x 5) 175

Table 2. Definitions
Variable(s) Definitions Data source
Market value A measurement used to describe the value of an asset or company in Bloomberg
financial markets (Christensen & Nikolaev, 2013)
Family ownership Percentage of general equity owned by the family (Anderson et al., 2012) Annual report
Total assets All assets or funds allocated by the company into an asset and support Bloomberg
operational activities (Kadim & Nardi, 2018)
Return on assets Measuring the company's efficiency in managing investments/assets and Bloomberg
using them to generate profits (Harelimana, 2017)
Return on equity Assess the company's ability to manage capital effectively and measure Bloomberg
profitability through owner or shareholder investment (Heikal et al., 2014)
Liquidity Describes the company's ability to meet all obligations as they fall due, Bloomberg
assuming that total current assets exceed the amount payable (Chasanah &
Sucipto, 2019)
WACC cost of equity The return that shareholders expect as compensation for the risk taken when Bloomberg
investing their capital (Maaloul, 2018)
WACC cost of debt A measure of the lender's calculated risk to the company or the expected Bloomberg
return (Jiraporn et al., 2013)

This study uses a quantitative approach. The panel data method was considered appropriate in this study
because it involved time series and cross-sectional data. Gretl Statistical Software is used to analyze the
data. This statistical process involves collecting secondary data, testing hypotheses, and identifying cause-

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and-effect relationships. The sample of this study uses mining companies, with several samples that meet
the criteria of 175 from 2016-to 2020 (can be seen in Table 1). The secondary data used are financial and
annual reports accessed through the Indonesia Stock Exchange (IDX) on the official website www.idx.co.id
to obtain information. The dependent variable used in this study is market value. The independent variable
uses three variables: family ownership, financial performance (covering ROA and ROE) and cost of capital
(WACC cost of equity and WACC cost of debt). The control variables used are Firm Size and Liquidity.
Variable measurements are summarized in the presentation of Table 2.

This study examines whether market value influences family ownership and the capital structure's financial
performance. A regression model can be presented as follows:

Model 1 is used to answer hypotheses 1 and 2

Model 1
MVit = α0 + β1FOit + β2ROAit + β3ROEit + β4WACCit + β5Liqit + β6 TotAsit + εt

Model 2 is used to answer hypothesis 3

Model 2
MVit = α0 + β1FOit + β2ROAit + β3ROEit + β4 WACEit + β5WACDit + β6Liqit + β7 TotAsit + εit

Models 3 and 4 are used as additional analyzes to explain the role of family ownership.
Model 3
MVit = α0 + β1FOit + β2ROAit + β3ROEit + β4WACCit + β5 FOit*ROAit + β6 Liqit + β7 TotAsit + εit

Model 4
MVit = α0 + β1FOit + β2ROAit + β3ROEit + β4WACCit + β5 FOit * TotAsit + β6 Liqit + β7 TotAsit + εit

Information:
MVit = Market value for firm i in year t;
FOit = Family ownership for company i in year t;
TotAsit = Total assets for company i in year t;
ROAit = Return on assets for company i in year t;
ROEit = Return on equity for company i in year t;
Liqit = Liquidity for company i in year t;
WACEit = WACC cost of equity for company i in year t;
WACDit = WACC cost of debt for company i in year t;
εit = Residual
each i and t denotes the firm and period.

ANALYSIS AND DISCUSSION

Analysis

The important thing in assessing panel data is determining the estimation model. In OLS, the assessment of
the superior regression model is carried out four times by obtaining an F-test for choosing a good model
between pooled, fixed panel and random effects, Hausman test as verification of whether the appropriate
one is a fixed panel effect or random panel effect (Hatane et al., 2019). So the results can be presented in
tables 5 and 6. If the result is a random effect, the classical assumptions can be ignored. Table 5 shows that
the results of the panel model test are random effects.

The mining industry is known to have profitability (ROA and ROE) and liquidity which is volatile and varies
widely between companies (the diversity is very large). The family ownership variable is measured using a
dummy variable; the mean value is 0.4, indicating that 40% of mining companies in Indonesia are family-
owned companies.

Table 4 explains the relationship between variables, but the relationship is not strong (correlation value < 0.7).

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Table 3. Descriptive statistic

Variables Minimum Maximum Mean Standard Deviation
FO (Dummy variable) 0.000 1.000 0.400 0.491
ROA -0.553 0.605 0.058 12.717
ROE -2.896 1.304 0.057 37.868
Liq 0.110 87.160 2.529 9.142
TotA 7.441 11.010 9.746 0.728
WACC -0.110 0.198 0.076 0.039
WACE -0.110 0.284 0.103 0.054
WACD 0.001 0.113 0.029 0.017
Market Value 0.003 1.528 0.148 0.291

Table 4. Correlation
Correlations
Variables
1 2 3 4 5 6 7 8
FO (1) 1 0.4078*** 0.1828** 0.1136* 0.012 -0.0675 -0.0474 0.2652***
ROA (2) 1 0.4702*** 0.1499** -0.0376 -0.1219 0.0868 0.2293***
ROE (3) 1 0.0978 0.0760 0.0335 -0.4219*** 0.2177***
WACC (4) 1 0.0738*** 0.0079 -0.2256*** 0.2331***
WACE (5) 1 0.1225 -0.2262*** 0.3240***
WACD (6) 1 -0.0473 0.2073***
Liq (7) 1 -0.2492***
TotA (8) 1

Table 5. Panel diagnostic test

Items Panel Diagnostic Test
P-Values Model 1 Model 2 Model 3 Model 4
Fixed Effect Estimator 1.26E-05 1.24E-04 6.29E-05 3.68E-05
Random Effect Estimator 3.06E-06 8.11E-05 7.57E-06 6.48E-05
Hausman test 0.7096 0.5598 0.7759 0.2777

Hostman test results in Table 5 show that models 1-4 contain a random panel effect (p-value > 10%).

Discussion

Table 6 shows the mixed results for each model. The ROA variable is quite consistent in increasing firm value,
as evidenced in models 1, 2, and 4. However, ROE cannot affect firm value. Likewise, WACC does not have
a significant effect on market value. Model 2 corroborates the findings of the insignificant WACC on market
value. The results in model 2 show that the cost of equity and cost of debt is not significant to the market
value. Firm size as a control variable is significant in increasing market value (shown in models 1, 2, and 3).

An interesting finding is in the family ownership variable. Family ownership is an attraction for investors in
mining companies, as evidenced in models 1 and 2. In model 3, family ownership in high profitability
companies is getting stronger in increasing market value. The results of the FO with ROA interaction showed
a significant positive value. Tests in model 4 further demonstrate the importance of family ownership in large
mining companies. A significant positive value evidences this result in the interaction of FO with Firm Size.

The study results indicate that the H1 is accepted, which means that family ownership affects market value
following the analysis. This study has shown that when the company applies a family ownership pattern
concentrating on the founders, the performance and market value are superior to non-family ownership. It
can be said that family ownership is an effective structure (Beuren et al., 2016). Family-owned firms are better
prepared to face increasing political uncertainty (Amore & Minichilli, 2018), natural disasters (Salvato et al.,
2020), which can reduce the cost of bank debt (D’Aurizio et al., 2015); (Lagaras & Tsoutsoura, 2015) and

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able to improve performance (Minichilli et al., 2016). When family ownership makes policies to increase the
company's value, this attracts investors to invest so that it can also positively impact the value of the company's
shares.

Table 6. Regression results – random effects

Variables Model 1 Model 2 Model 3 Model 4
Const −1.0921** −1.1409*** −1.0978*** −0.1972
(0.0125) (0.0096) (0.0086) (0.6946)
FO 0.1565* 0.1567* 0.1018 −3.0147***
(0.0809) (0.0787) (0.2446) (0.0016)
ROA 0.0029 *** 0.0029*** −0.0003 0.0028***
(0.0013) (0.0011) (0.7922) (0.0012)
−0.0001 -0.0003 -8.94E-05 -0.0001
ROE
(0.6017) (0.4491) (0.7224) (0.5665)
WACC 0.1116 0.1592 0.0710
(0.6731) (0.5232) (0.7825)
WACE −0.0772
(0.6738)
WACD 0.4593
(0.4070)
FO*ROA 0.0072***
(5.13E-06)
FO*TotA 0.3214***
(0.0009)
Liq 0.0001 -0.0003 0.0002 -0.0003
(0.9201) (0.8062) (0.8718) (0.7994)
TotA 0.1183*** 0.1237*** 0.1190*** 0.0254
(0.0090) (0.0068) (0.0059) (0.6261)
F-Test 26.5707 27.2991 50.1298 39.3084
P-Value F test 0.0002 0.0002 1.36E-09 1.71E-06
R-square 0.2451 0.2447 0.3088 0.2785
Notes: *p < 0.10 (weakly significant); **p < 0.05 (significant); ***p < 0.01 (highly significant)

H2a and H2b show different results. ROA have a significant effect on market value, and ROE has no
significant effect on market value—similarly, data processing results for total assets and liquidity. The results
of the study of total assets on market value showed significant positive results, which are also relevant to
(Tsai et al., 2012) and (Appelbaum et al., 2017) that assets, one of which is an intangible asset, can represent
the company's profitability in the future to encourage growth opportunities in increasing the market value of a
company. When the company's performance grows, it means that the higher the ability of a company to utilize
total assets that affect revenue. This statement is also supported by research (Ievdokymov et al., 2020);
(Jaara & Elkotayni, 2016); (Soda et al., 2021); (Owusu & Alhassan, 2020). The company must be able to
implement and manage strong financial policies and increase the volume of fixed asset investment so that
later it will produce a financial performance that encourages potential investors so that it becomes an added
value for the company. The significant effect of fixed assets on market value is stated in the research (Ramli
et al., 2019), (Deari & Dinca, 2015); tangible assets become assets that are easily pledged and the asset
turnover rate is higher in the joint-stock so that it will generate a lot of productivity which contributes to the
market value.

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 Purnamawati: Family Ownership Matters for Investor in Indonesia’s Mining Companies

The research results on ROA are relevant to (Wang & Shailer, 2017), (Obradovich & Gill, 2013), as well as
(Wang et al., 2016), which state that there is a positive relationship between return on assets and market
value. (Gulamhussen et al., 2012) also said that there is a positive relationship between managerial
ownership, financial performance using ROA and market value (Tobin's Q) (Minichilli et al., 2015) conducted
a study on the entire population of family and non-family companies in Italian regional industrial companies
that were publicly listed during the period 2002-2012, where this study found that financial performance with
family ownership patterns was significantly and consistently better amid the economic crisis, performance.
One of them is using ROA to produce much better performance in dealing with external hazards so that it
does not affect the market value of a company.

ROE, by the results of the study, states that it has no significant effect on market value; it is supported by
(Karaca & Savsar, 2012) and (Habibniya & Dsouza, 2018), where this ROE variable as the company's
fundamentals is not a strong choice for investors to invest in a company, where investors who do not like risky
risk will be more careful in determining how to invest in a company even though it is known that the prospects
for profit growth and investment can be better. Increase. It affects the market value of a company, which is
likely to decrease its share price. ROE variable is part of the profitability ratio, but the liquidity ratio did not
show significant results. This result also follows the research by (Tahu & Susilo, 2017), which found no
significant effect on firm value. Liquidity is not very important for external parties in assessing a company so
that this liquidity does not influence changes in the company's stock price. In addition, the results of this study
also do not support the statement that cash flow information of a company is one of the main sources in
assessing performance, both the ability to generate cash and its equivalent. In line with (Mahendra et al.,
2012), (Timbuleng, et al., 2015), and (Fajaria & Isnalita, 2018) found that the liquidity ratio did not significantly
affect a firm value.

The next independent variable is capital structure using WACC as research data. The results show that
capital structure does not significantly affect market value, and H3 is rejected. These results are also
consistent with the research of (Zeitun & Tian, 2014), which states that capital structure has a negative effect
on market value; further research by (Sattar, 2015) states that WACC has a negative impact on firm value,
so the company is expected to be able to maintain the cost of capital and increase the size of the company.
This study indicates that investors do not respond to the cost of capital, both the cost of equity and the cost
of debt. As also explained by (Frank & Shen, 2016) and (Xu et al., 2014) in research conducted on several
companies, the cost of equity has a negative effect on the investment or investors of a company, research
conducted by (Loncan & Caldeira, 2014); (Meng & Yin, 2019); (Tran, 2021) also gives the result that the cost
of debt negatively affects the market value of a company so that it has an impact on the confidence of potential
investors. The existence of a policy of debt and equity capital is said to increase the company's value by
reducing the WACC to a certain level of debt. The company is declared a maximum capital structure if the
WACC is minimal to maximize the value. So the company should be able to reduce the use of debt to the
point where the weighted average cost of capital begins to increase, which will make the company value
decrease (Adenugba et al., 2016).

CONCLUSIONS AND RECOMMENDATIONS

The research results indicate that the three independent variables provide different research results. Signal
theory is used to show information about the quality of the company's performance to stakeholders or, in this
case, investors. In addition, this theory reduces information asymmetry between related parties such as
investors and management. The existence of differences in information between entities and stakeholders
causes actions from the company by giving signals or signals to provide instructions to stakeholders in seeing
the company's prospects. The signal given by the company is the performance that the organization has
carried out to realize the wishes of stakeholders. The limitation of this study is that it only uses three
independent variables, which have shortcomings in showing how market value can increase the value of a
company. In addition, the research is still limited to using mining companies listed on the BEI. They are not
representative of all companies, especially companies that apply a family ownership pattern.

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International Journal of Financial and Investment Studies (IJFIS), Vol. 4, No. 1, April 2023: 17-30

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