4. Past studies on Indonesia

Indonesia underwent several reformations in its financial system as its financial market activities decades ago were dull and there were a lot of flaws in the firms' financing choices with state-owned banks dominating the debt market and overshadowed the capital market [24]. It was apparent that Indonesian financial systems then needed robust deregulations and reformations. The government control over initial offering prices and the daily movement of stock prices was lifted, providing a fair game between the state and private banks, the choices between debt and equity as well as between internal and external sources of equity. Corporate governance became prevalent in Indonesia since the 1997 Asian financial crisis due to the fact that most firms are exposed to the shock wave of financial crisis. Indonesian government through the capital market regulatory body has started to initiate multiple reforms by starting enacted corporate governance's laws and regulations. Along the way, the government has developed standards and has strengthened enforcement for all listed firms in Indonesian Stock Exchange (IDX) as outlined in the good corporate governance guidelines. All listed firms in IDX should comply with corporate governance regulations [24]. After several financial reformations, trading activities in Indonesia were then started to improve and market capitalization grew alongside the development of Indonesia's financial markets and private sector highlighted by a major bull run in 1990 [25]. At present after several financial reformations and severe experiences during several financial crises, [26] predicts in the long-term perspective of 2016–2020 that Indonesia's average real growth rate is predicted to remain high at 5.5% per year, higher than the average real growth rate of 5.2% of ASEAN (10 countries) compared to China and India of 6.0 and 7.3%, respectively.

Family-owned businesses account for approximately 40% of market capitalization in Indonesia and have substantial impact on several important sectors like property, agriculture, energy, and consumer goods. Data from the Boston Consulting Group show that in the developed market like the US, many of the family businesses are into their fourth or fifth generations. However, only about 30% of Indonesian family businesses survive the first generation and about 9% move into the third generation. This implies that more than half of the family businesses in Indonesia are still in the growth phase with uncertainties in the future, thus making financial decision a crucial element to study [27]. Secondly, corporate governance in Indonesia is distinguished by the fact that the majority of firms are owned and managed by founding family members. Around 67% of listed firms in Indonesia are family controlled [4].

non-family owned, and the founder does not influence debt level of the US industrial firms. Ampenberger et al. [21] discovered that family-owned firms in Germany have a negative impact on the capital structure and this is perhaps due to the involvement of the founder

Based on what have been reviewed above, literature has been documenting mixed results pertaining to the impact of family owned on firms' debt financing in various countries regardless of the economic landscapes. For instance, [19, 21] find family-owned firms are considerably underleveraged comparative to the non-family-owned firms. In contrast, there are studies that reveal positive relationships, indicating that family-owned firms are more leveraged than the non-family-owned firms [14, 22, 23]. Looking at the financial behavior of the firms, [21] depict family management as the main determinant of lower debt level of family-owned firms. Gottardo and Moisello [22] on the other hand report active family management as the major determinant of high debt level. Other determinants like maintenance of control and influence, growth opportunities, and risk aversion do play a part in the debt financing decisions of

Indonesia underwent several reformations in its financial system as its financial market activities decades ago were dull and there were a lot of flaws in the firms' financing choices with state-owned banks dominating the debt market and overshadowed the capital market [24]. It was apparent that Indonesian financial systems then needed robust deregulations and reformations. The government control over initial offering prices and the daily movement of stock prices was lifted, providing a fair game between the state and private banks, the choices between debt and equity as well as between internal and external sources of equity. Corporate governance became prevalent in Indonesia since the 1997 Asian financial crisis due to the fact that most firms are exposed to the shock wave of financial crisis. Indonesian government through the capital market regulatory body has started to initiate multiple reforms by starting enacted corporate governance's laws and regulations. Along the way, the government has developed standards and has strengthened enforcement for all listed firms in Indonesian Stock Exchange (IDX) as outlined in the good corporate governance guidelines. All listed firms in IDX should comply with corporate governance regulations [24]. After several financial reformations, trading activities in Indonesia were then started to improve and market capitalization grew alongside the development of Indonesia's financial markets and private sector highlighted by a major bull run in 1990 [25]. At present after several financial reformations and severe experiences during several financial crises, [26] predicts in the long-term perspective of 2016–2020 that Indonesia's average real growth rate is predicted to remain high at 5.5% per year, higher than the average real growth rate of 5.2% of ASEAN (10 countries) compared

Family-owned businesses account for approximately 40% of market capitalization in Indonesia and have substantial impact on several important sectors like property, agriculture, energy, and consumer goods. Data from the Boston Consulting Group show that in the developed

CEO in the management.

8 Financial Management from an Emerging Market Perspective

family-owned firms [13].

4. Past studies on Indonesia

to China and India of 6.0 and 7.3%, respectively.

Looking at the journey of Indonesia's financial market for several decades and where it stands now, several studies have documented interesting findings in the literature. For examples, [28] conduct a survey on capital structure and dividend policy on the CEOs of all 180 firms listed on the IDX. The analysis reveals that firms seem to have good access to various sources of funds like debt and equities. Nevertheless, that access is not because of information asymmetry but because of fairly reasonable interest rates, thus no influence of the pecking order theory in this case. Ruslim et al. [29] analyze a sample of 18 Indonesian firms for the period of 2000–2006 and find that profitability has no significant impact on the debt financing of firms in Indonesia, again implying no evidence of pecking order theory influence in the financing decisions in Indonesia which is in line with [28]. Bunkanwanicha et al. [30], on a different strand, incorporate corporate governance arrangement in their study on Indonesia and find that weaker corporate governance seems to have higher debt level especially during financial crisis. They also highlight that country-level determinants could also impact empirical results.

Moosa and Li [24] when studying the financial structure of firms in Indonesia reveal that some firm-level determinants may not have similar impacts on the firms' capital structure like what have been documented in the body of knowledge. They also discover that the financial reformation experienced by the firms has indeed eliminated the inefficient corporate financial policies and financial market during the dominance of state banks.

Saadah and Prijadi [31] examine the capital structure of 53 manufacturing firms in Indonesia over a study period from 2001 to 2008. Using the determinants representing the main capital structure theories, they reveal that the trade-off theory and pecking order theory are quite pronounced, working side by side in the financing decisions of the firms. This implies that no single theory is able to explain the capital structure of firms and thus supports [32] statement that a collaboration of theories is needed to better explain the financing choices of firms. Hardiyanto et al. [33], using a panel data from year 2005 to 2011 on 228 companies, conclude that firms in Indonesia have specific level of debt ratio in their capital structure and try to maintain that debt ratio level for it is believed to maximize firm value. They also argue that certain firm-level determinants do play significant roles in maintaining the debt ratio; thus, managers should take into account the costs that the firm may incur should they adjust their capital structure in striving for value maximization.

Very recently, Haron [25] investigates 365 listed companies using a panel data from year 2000 to 2011 and concludes that POT has significant influence on the capital structure of firms in Indonesia, with several determinants affecting the financing decisions. This is perhaps, according to [25], due to the effects of the financial deregulations taken place where internal financing is also significantly preferred in financing investments and projects, not merely bank loans as previously discussed. An indication of market timing theory at work is also traced where firms seem to time their equity issuance.

Literature on Indonesia has also been compiling evidences where firms with highly concentrated ownership structure suffer with agency problems between the controlling shareholders and minority shareholders [11, 12, 34, 35]. This study therefore reveals the insights on how ownership concentration in Indonesia impacts the financing decisions and can perhaps be inferred to by her neighboring countries for which they are reported to share similar ownership concentration structure and thus fill the gap in the literature.
