ABSTRACT
THE EFFECT OF INSTITUTIONAL OWNERSHIP ON VALUE OF THE COMPANY STUDY OF MANUFACTURING COMPANY LISTED
IN INDONESIAN STOCK EXCHANGE 2010-2014 PERIOD
By
WINY FASADINISARI
This study aims to prove the influence ofinstitutional ownership on company’s value of
manufacturing companies listed in Indonesian Stock Exchange in 2010-2014. The population in this research that all manufacturing companies listed in Indonesian Stock Exchange in 2010-2014 as many as 141 companies. Samples were taken by using
purposive sampling method, so that there are 84 manufacturing companies. The data used in this research is panel data. Total observation in this study as many as 420 observations The analysis tool used is descriptive analysis and multiple linear regression analysis, which for the regression in this study using a fixed effect approach.
The results show that institutional ownership has no effect on the value of the company on manufacturing companies listed in Indonesian Stock Exchange 2010-2014. Causes of institutional ownership has no effect is due to the existence of asymmetric information. In addition, the form of the company which has shareholdings are also suspected to be the cause of not found the influence of institutional ownership. Future research are expected to classify the type of institutional ownership and also make a variable of institutional
ownership as a moderating variable that not as the main independent variable.
BIOGRAPHY
The writer were born in Kulon Progo on March, 24th 1994, as a second daughter of Mr. Slamet Darminto (alm.) and Mrs. Risma Pijayantini. The writer start her study in kindergarten education of Permata Bandar Lampung completed in 2001, after that the writer continue her study at Al-Kautsar Elementary School that finished in 2006, Al-Kautsar Junior High School that finished in 2009, and then at Al-Kautsar Senior High School that finished in 20012.
THE EFFECT OF INSTITUTIONAL OWNERSHIP ON VALUE OF THE COMPANY STUDY OF MANUFACTURING COMPANY LISTED
IN INDONESIAN STOCK EXCHANGE 2010-2014 PERIOD
By
WINY FASADINISARI
Undergraduate Thesis As on of requirement to achieve BACHELOR OF ECONOMICS DEGREE
from
Management Departement
Faculty of Economics and Business University of Lampung
FACULTY OF ECONOMICS AND BUSINESS THE UNIVERSITY OF LAMPUNG
LIST OF CONTENTS
Page
LIST OF TABLE ... xii
LIST OF FIGURE...xiii
I. INTRODUCTION ... 1
1.1 Background ... 1
1.2 Problem Formulation ... 8
1.3 Purpose of the Research ... 9
1.4 Research Benefit ... 9
1.5 Theoretical Framework ... 9
1.6 Hypothesis... 11
II. LITERATURE REVIEW... 12
2.1 Theoretical Basis ... 12
A. Agency Theory ... 12
B. Good Corporate Gorenance Theory... 13
C. Institutional Ownership... 15
D. Value of the Company ... 17
2.2 Previous Research ... 18
III. RESEARCH METHODOLOGY... 21
3.1 Research Object ... 21
A. Population and Sample ... 21
3.2 Reserach Design... 22
A. Type and Source of Data ... 22
3.3 Research Variable dan Operational Variable ... 23
A. Research Variable ... 23
B. Operational Definition of Variable ... 24
2. Independent Variable... 24
3. Control Variable ... 25
3.4 Analysis Tools... 27
A. Descriptive Analysis ... 27
B. Multiple Linier Regression Analysis ... 27
C. Classical Assumption Testing... 29
1. Normality Testing... 29
2. Multicolinearity Testing ... 30
3. Heteroscedasticity Testing... 30
4. Autocorrelation Testing ... 31
D. Hypothesis Test ... 32
1. T-Statistical Testing... 32
2. F-Statistical Testing ... 33
IV. RESULT AND EXPLANATORY ... 35
4.1 Descriptive Statistics ... 35
4.2 Model Testing ... 36
A. Chow Testing... 36
B. Hausman Testing ... 38
4.3 Classical Assumption Testing ... 40
A. Normality Testing ... 40
B. Multicolinearity Testing... 41
C. Heteroscedasticity Testing... ... 42
D. Autocorrelation Testing ... 44
4.4 Hypothesis Testing... 45
V. CONCLUSSION AND SUGGESTION ... 53
5.1 Conclussion ... 53
5.2 Suggestion ... 53
LISTS OF FIGURE
Figure Page
1. Share Proportion of Manufacturing Company in 2014 ... 2
2. The Framework of Institutional Ownership Through Value of the Company ... 10
3. Decision Areas of Durbin-Watson Statistical Test... 32
4. Jarque-Bera Normality Test Results... 40
LISTS OF TABLE
Table Page
1. Summary of Previous Research ... 18
2. Research Sample... 22
3. Summary of Definition and Operationaliozation Variable... 26
4. Result of Descriptive Statistics... 35
5. Result of Regression Using Pooled Least Square and Fixed Effect Approach (Summary)... 37
6. Chow Test (Selection between Fixed and Common Model)... 38
7. Regression Results From the Fixed Effects and Random Effect approach (Summary) ... 38
8. Hausman Test (Selection between Fixed and Random Model) ... 39
9. Correlation Coefficient Calculation Results... 41
10. ChisquareCount... 43
11. Summary ofStandard Errorand t Statistics ... 44
12. Regression Results of Variables Company Value (PBV), Institutional Ownership (INS), Dividend Policy (DEV), Debt Policy (DER), and Company Growth (GRO) ... 45
MOTTO
Be thankfull of scantiness
THE EFFECT OF INSTITUTIONAL OWNERSHIP ON VALUE OF THE COMPANY STUDY OF MANUFACTURING COMPANY LISTED
IN INDONESIAN STOCK EXCHANGE 2010-2014 PERIOD
(Undergraduate Thesis)
By
WINY FASADINISARI
FACULTY OF ECONOMICS AND BUSINESS THE UNIVERSITY OF LAMPUNG
PROLOGUE
Bismillahrrohmanirrohim,
Alhamdulillahirobbilalamin, Praise to Allah SWT who has been giving out mercy, guidance, and His good pleasure, so that I can finish the undergraduate thesis
entitled “The Effect of Institutional Ownership on Value of The Company Study of Manufacturing Company Listed in Indonesian Stock Exchange 2010-2014 Period”. This undergraduate thesis is one of the requirements to complete the
study on the management bachelor program at the Faculty of Economics and
Business, University of Lampung. In this chance, I would like deeply thanks to:
1. My family, for my missed dad Slamet Darminto (alm.) and My great mom, Risma Pijayantini who already give motivate, take care with all her heart and soul, teach, give a support for both moriil and materiil. My dearest beutiful sister, Maulina, thanks for the advise you have been given for me.
2. Mr. Prof. Dr. H. Satria Bangsawan, S.E., M.Si. as the Dean of Faculty of Economics and Business, University of Lampung, for help and give permission to do the research.
4. Prof. Dr. Mahatma Kufepaksi, S.E., M.B.A. an Examiner Lecturer who always give critics and suggestion that aims to improving quality of this
undergraduate thesis.
5. Faila Shofa, S.E., M.S.M., as my education advisor who always give an advise for my study plan.
6. Faculty of Economics and Business’ lecturers and staffs of management program whose already help me to finished my undergraduate thesis. 7. My pretty ladies Wanita Muslimah, Larasati Ahluwalia, Nerissa Arviana,
Mahardita Dinda, Rama Dewi F, Firstiana Putri, Hesta Rina H.T, who always give full support since very beginning of my collage study until now.
8. My Bilingual Class batch 2012: Siska, Saput, Marlia, Ayu, Lele, Baock, Fadil, Donna, Keke, Brenski, Reza, Kemas, Elidun, Ucang, Citra, Dirga, dan Abe, thank you for our togetherness in more than 3 years.
9. My EEC’s presidiums 2014/2015: Kiky, Sindy, Iin, Yunita, Elia, Pandu, Hanum, Nizar, Ageng, Khafi, Asri, Soni and also all EEC’s boards and newbies.
10.Thaks to my old friends since junior and senior high school: Yose, Ica, Miya, Eka, Nia, Nadya, Osa, Opi, Ina, Abay, Vina, Aulia, Mely, Doni, Adib, Sita. 11.Management Class batch 2012; Wahid, Sella, Ayu, Dewi, Liana, Tari, Ika,
Wenika, Akil, Any, Atsil, Heylin, Novi, Muli, Edo, Albet, Cipt, Delta, Deri, Endah, Ilham, Rika, Septi, Susan, Zenicko, Yoga and others whose can not I mention one by one.
I realize that there are still a lot of lacks in this writing. Therefore, all feedback, criticisms, and constructive suggestions are needed for further improvements in this researach. I hope that Allah repay you all and hopefully this undergraduate thesis can be useful for me in particular and all readers in general.
Bandarlampung, February, 17th 2016
TRIBUTE
Bismillahirrohmanirrohim,
segala puji bagi Allah yang Maha Pengasih dan Maha Penyayang
This undergraduate thesis is tribute to my beloved mother, my sister, and also my missed father. Thank you for all the love that has been given to me which will never
be paid off by anything.
53
V. CONCLUSSION AND SUGGESTION
5.1 Conclussion
Based on the results of regression and analysis of data on the effect of institutional ownership on company’s valuein manufacturing companies listed on the Stock Exchange in 2010-2014, it can be concluded that
institutional ownership is not a significantly effect the value of the company on manufacturing companies listed in Indonesia Stock Exchange in 2010-2014.
Another variable that dividend policy, debt policy, and growth of the company, based on the results of regression is shows that all three
significantly influence the value of the company. Dividend policy significant positive effect on the value of the company, debt policy significantly negative effect on the value of the company, and the company's growth significantly negative effect on the value of the company.
5.2 Suggestion
54
1. Separating the ownership by the parent company and ownership by an external company.
2. Future studies should use institutional ownership variable that put as a moderating variable affecting the independent variable on the dependent variable. Because this study did not find any effect on the value of the company if institutional ownership as the main independent variable, making it possible that the institution has an indirect effect on company’s
value.
1
I. INTRODUCTION
1.1 Background
Each company must have a clear purpose. Generally, there are several objectives of a company. The first company’sgoal is to achieve the maximum benefit or profit maximization. The second goal is to prosper owner of the company or shareholders. While the company's third goal is to maximize the value of the company which reflected in its share price. Substantially, the objectives of each company are not much different. It just the emphasis to be achieved by each company are different from one to another.
The long-term business entity’s goalis to maximize the value of the company and all activities geared to achieving that goal. Achieving the objectives of the company is done through the implementation of policies taken by the company, one that affects the policy-making is the ownership structure.
2
The following figure represents the average proportion of shares ownership of in a manufacturing company in 2014.
Figure 1. Share Proportion of Manufacturing Company in 2014. Source: Indonesia Stock Exchange
We can see in Figure 1 above, the institutional ownership reached 72% in manufacturing companies, public amounted to 25%, while the share ownership by others (managers, individu, etc.) is 3%. So that, this kind of ownership structure, may lead to difference of interests between shareholders and managers.
The structure of ownership in the company may affect the company's decision making in order to enhance shareholder value. Increasing the value of the company can be reached if there is cooperation between the management company and other parties that include shareholders and stakeholders in making financial decisions with the objective of maximizing working capital
72% 25%
3%
3
owned. If the action between the managers of the other party goes well, the problems between the two parties will not occur (Laila, 2011).
Based on agency theory, when managers and shareholders have different interests, then it can lead to agency problems or conflicts of interest. These conflicts of interest may increase the agency costs. Problems between managers and shareholders called agency problem.
The agency problems will lead to failure to achieve the financial objectives of the company (which increases the value of the company by maximizing shareholder value). It requires an external control where the role of monitoring and supervising will be directed to its goals.
Agency theory, Jensen and Meckling (1976) states that the agency theory describes shareholders as a principal and management as an agent.
Management is a party contracted by the shareholders to work in the interests of shareholders. So that, the management provided most power to make decisions in the interest of shareholders. Management is obliged to responsible for all its efforts to the shareholders. The emergence of the agency problem because of mismatch desire between shareholders and management.
4
Sugiarto (2009) states that the agency problem may occur in various types. The first type is a conflict between managers and shareholders. The second type is a conflict between the majority shareholder with minority
shareholders. The third type is the conflict between the shareholders or menajer with the lender.
Share ownership by the institution is considered being an effective
monitoring tool against the agency problem like this. Allegedly, institutional investors are able to prevent the occurrence of earnings management than individual investors. Institutional investors considered more professional in control of its investment portfolio, so it is less likely to get a distorted financial information. A huge percentage of shares owned by institutional investors will make the surveillance conducted become more effective. Because it can control the opportunistic behavior of managers and reduce agency cost (Nuraina, 2012).
Definitively good corporate governance (GCG) is a system that regulates and controls the company that creates value added for all stakeholders. This concept emphasized that shareholders have a right to obtain information correctly and timely. As well as the company's obligation to make an accurate, timely, and transparent disclosure about the information of corporate performance, ownership, and stakeholders.
Institutions as the owner of the company has a strategic role in effecting the company, because institutions are considered more professional than
5
as an institutional agent that will encourage more optimal control on management performance. Investors in this case has an influence on the running of the company.
Wahyudi and Parwestri (2006) states that the company's ownership structure is expected to affect the company's decision. The higher institutional
ownership the stronger an external control of the company and reduce agency cost.
Institutional ownership is shareholding company owned by institutions such as insurance companies, banks, investment companies and other institutional ownership. The existence of institutional investors is considered as an effective monitoring mechanism in any decision taken by the manager. This is because the institutional investors involved in strategic decision-making that not easily believe against the actions of earnings manipulation (Nuraini et al., 2014).
Some studies found the surveillance activities of the institution is able to change the structure of the management of the company and able to increase the prosperity of shareholders in terms of increasing company value.
Supervision conducted by the institution can decrease agency costs that may blead to increasing the value of the company.
6
institutional ownership has an important role in monitoring the management because the institutional ownership will encourage more optimal supervision. The monitoring would certainly guarantee the prosperity of shareholders, the influence of institutional ownership as a supervisory agent emphasized through their sizeable investments in capital markets.
Research conducted by Nuraina (2012) on the companies listed in Indonesia Stock Exchange, found that institutional ownership has a significant positive effect on firm value. This study state that, the higher the level of institutional ownership, the stronger degree of control carried out by external parties to the company. So that the agency cost which occurred in the company is
decreased and the company's value can be increased.
Sukirni (2012), which examines the influence of institutional ownership on firm value in companies listed on the Indonesia Stock Exchange, found that institutional ownership has a significant positive effect on firm value.
Research by Dian and Lidyah (2013) found that institutional ownership significantly affecting the value of the company. The increased of
institutional ownership can attract investors to invest in the company because, investors think that their investment will grow continually. The investors assume with high institutional ownership, the oversight of the company's performance is also high too, so the company is able to generate high profits and could benefit the investors.
7
the positive relation. The higher proportion of institutional ownership, the higher company's value will be. High institutional ownership will improve the supervision of the company. A high supervision will minimize the manipulation committed by the management that will affectingcompany’s
value. In addition, institutional owners would try to make positive efforts to increase the value of the company.
Research conducted by Adnantara (2013) found that institutional ownership has no significant effect on firm value. In the study mentioned that this could occur due to asymmetric information between investors and managers. This can make institutional shareholders are not satisfied with the performance of managerial, then decided to sell its shares to the market, where this can decrease the value of the company.
The research from Senda (2013) found that institutional ownership has a negative unsignificant relationship on value of the company. Research carried out on all companies listed in the Indonesian Stock Exchange (BEI).
Senda (2013) states that the unsignificant relationship between institutional ownership on the value of the company because of the asymmetry
8
The research from Wongso (2013) found that shares ownership by
institutional negatively affect the value of the company. This means that the higher institutional ownership, the higher company's value will decrease. This result is supported by research Sudjoko and Soebiantoro (2007) that found institutional ownership has significant negative effect on the value of the company.
We found there are a mismatch results in several studies described before, some studies state that institutional ownership has a positive relationship to the value of the company, while others stated that institutional ownership has a negative effect on the value of the company and there are also found that institutional ownership has no significant effect on the value of the company. So that further research is necessary to provide empirical evidence about the effect of institutional ownership oncompany’svalue. The title of this research is,“The Effect of Institutional Ownership On Value of The Company Study Of Manufacturing Company Listed in Indonesia Stock Exchange Year 2010-2014”.
1.2 Problem Formulation
9
1.3 Purpose of The Research
The purpose of this research is to analyze the influence of institutional
ownership on company value in manufacturing companies listed in Indonesia Stock Exchange 2010 until 2014 period.
1.4 Research Benefits
Results of this research hopefully will be useful for:
1. For academics, this study may provide empirical evidence about the influence of institutional ownership on the company's value, so it can provide in-depth insight and knowledge of the topics covered in this study.
2. For investors, can be taken as a consideration in the outlook for the value of the company so that it can assist in making investment decisions in the company.
3. For the researchers and the general public can be used as a reference for future research.
1.5 Theoritical Framework
Institutional ownership is considered capable of overcoming the agency conflict because the performance of the manager can be monitored effectively. Institutional ownership provides oversight of management performance, especially in the use of company’sfunds. The greater
10
bankruptcy of the company. Reducing the risk of bankruptcy of the company and also with the strict controls carried out on the performance of the
manager, then the manager will seek to maximize corporate profits. It means that the value of the company also increased (Kaluti, 2014).
Research by Nuraina (2012) found that institutional ownership has a significant positive effect on firm value. This contrasts with research conducted by Wahyudi and Pawestri (2006) who found results that institutional ownership has no effect on the value of the firm.
Based on the description above, can be made framework that describes the relationship between the value of the company with institutional ownership that shown in the following figure:
Figure 2. The Framework of Instirusional Ownership Through Value of the Company.
Figure 2 above shows the relationship variables examined in this research, which this figure can be seen that the researchers will examine the effect of independent variables (institutional ownership) on the dependent variable (value the firm).
Independent Variable (X) Institutional Ownership
(INS)
H1
11
I.6 Hypothesis
Based on agency theory and corporate governance theory, stating that institutional ownership can overcome agency problems, where the role of institutional shareholders as an overseer can affect the policies taken by the company to maximize the value of the firm. Also, based on some previous research that found that institutional ownership has significant positively related to firm value, then the hypothesis in this study are:
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II. LITERATURE REVIEW
2.1 Theoretical Basis
A. Agency Theory
Agency theory as a basic in understanding corporate governance. Agency theory is a contract between the owner (principal) and managers as agents (Jensen and Meckling, 1976). The core issue of agency theory that a proper planning contracts between owners and managers to align interests.
According to the agency theory Jensen and Meckling (1976), principal is the shareholder and the managing agent is the management of the firm. The shareholders hope that the agent will act in the interests of the shareholders, so that they can delegate authority to the agent. But mostly there is a difference of interests between shareholders and agents, as well as the asymmetry of information, resulting in frequent conflict.
13
Thus there are two different interests in the company in which each party seeks to achieve the desired prosperity (Nugroho and Syafrudin, 2012).
A lot of managers seek to increase the scale of the firm by expansion than the prosperity of the shareholders. Dissimilarity goals between
shareholders and company’smanagers are often called agency problem (Arifin and Ratnawati, 2012). The existence of agency problems would caused costs for companies to overcome the problems, these costs are called agency cost.
There are several ways to reduce the agency cost, one is to increase the shareholding to the management (Jensen and Meckling 1976). The greater ownership by the management will reduce the potential for conflict
between management and shareholders. Moh'd et al (1998) stated that the distribution of shares between shareholders from outside (institutional investors) and dispersion of ownership can reduce agency cost.
Institutional Ownership such as banks, insurance companies or investment companies will increase control that come from external management.
B. Good Corporate Governance Theory
According to Barnhart and Rosenstein (1998) in Siallagan and Machfoedz (2006) agency problem can be solved by good corporate governance (GCG), which are the internal mechanism and external mechanisms.
14
controlled on the course of corporate activities. What is meant by who are the shareholders, while the why is because of the relationship between the shareholders of the various parties interested in the company.
Good corporate governance (GCG) definitively a system to regulate and control the firm that create value added for all stakeholders (Monks, 2003). There are two things that are emphasized in this concept. First, the importance of the right of shareholders to obtain information correctly and on time. Second, the company's obligation to make an accurate, timely, and transparent disclosure about information of corporate performance, ownership, and stakeholders.
According Kaihatu (2006) in general, there are five basic principles of good corporate governance:
1. Transparency(information disclosure), the transparency in decision making process and openness in expressing material and relevant information about the company.
2. Accountability, namely clarity of function, structure, systems, and accountability of corporate divisions, so that the management system of company is effectively implemented.
3. Responsibilityis suitability in the management of the company to the principle of healthy corporate and applicable legislation.
4. Independencyis a condition in which a company is managed
15
management that is not in accordance with the regulations and legislation and also the principles of healthy corporate.
5. Fairnessis fair and equitable in fulfilling the stakeholder rights which comes under the agreement and applicable laws and regulations.
Corporate governance mechanism can be divided into internal mechanism and external mechanisms. Internal mechanism came from the board of directors, internal control and internal audit functions. The quality of the internal mechanism is widely associated with better corporate
performance (Dharmastuti, 2013). Supervision by the board of
commissioners is a mechanism that is essential in aligning the interests of shareholders and management. External mechanism derived from the capital market, the firm control market, the labor market, the status of the state, the court's decision, the shareholders and the practice of investor activity.
External mechanisms of corporate governance will be examined through the role of institutional shareholders. Institutions as the owner of the company has a strategic role in giving effect to the company.
C. Institutional Ownership
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institutional ownership and individual ownership or a mixture of both with a certain proportion.
Husnan (2001) reveal that there are two types of ownership in a company in Indonesia which are companies with very spread ownership and
company with concentrated ownership. More spread corporate ownership gives greater rewards to the management (Goldberg and Idson, 1995 in Husnan, 2001). In the concentrated type of ownership, there are two group of shareholders, that are controlling and minority shareholders (Asian Development Bank, 2000 cited in Husnan, 2001). The controlling shareholders can act together with the interests of shareholders or againts the interests of shareholders, as it also has more information than the minority shareholders, it will affect the behavior of company (The Bussiness Roundtable, 1997). In the case of the concentration of ownership, the possibility of agency problem that arises is the majority owner and minority owner. The majority owner participated in
controlling company that tend to act in their own interests although at the expense of minority owners.
The characteristics of concentrated ownership in the company are very common in the companies listed in Indonesia Stock Exchange (Husnan, 2001). An institution that is meant is the owner of a public company in the form of institutions, not the owner of individuals or private. A
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disadvantage of concentrated ownership presented by Shleifer and Vishny (1997) in Wulandari (2006) is in the possession of large amounts of shares can put the interests of their own which might be contradict with other owners.
Institutional ownership has the ability to control the management through effective monitoring process, thereby reducing management actions that perform earnings management. A certain percentage of shares owned by the institution can affect the financial statements preparation process that do not rule out the possibility of the interests Accrued management (Boediono, 2005).
Allegedly institutional investors are able to prevent the occurrence of profit management than individual investors. Institutional investors considered more professional in control of its investment portfolio, so it is less likely to get distorted financial information.
D. Value of The Company
The company's main purpose according to theory of the firm is to
maximize wealth or company’svalue (Salvatore cited in Apriada, 2013). The high value of the company is the desire of the owners of the
company, because with a high value indicates that prosperity of the shareholders is also high.
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company's stock price. Investors whose are assessing the company that has good prospects in the future will tend to buy shares of the company. As a result of high demand for stocks caused the stock price to rise. It can be concluded, when the stock price is high, it is indicates that investors give high value to the company. The value of company can also provide maximum shareholder wealth when the company's stock price is rising. The higher the stock price, the higher the wealth of shareholders.
2.2 Previous Research
[image:40.595.135.527.485.754.2]In this research, the researchers tried to examine the effect of of institutional ownership structure on firm value. This research is conducted because based on previous studies, they showed inconsistent results about the effect of institutional ownership, as presented in the following table:
Table 1. Summary of Previous Research
Author Title Variable Sample Result
Dependent Independent 1 Haruman (2008) Effect of Ownership Structure and Financial Decision Through Corporate Value
Value of the company Financial decisions Institutional ownership 94 manufactures companies listed on Indonesia stock exchange Institutional ownership has a positive effect on firm value
Sukirni (2012) Managerial Ownership, Institutional Ownership, Dividend Policy and Debt Policy Analysis of the Value of the Company (the study of
companies listed on the Indonesia Stock Exchange years 2008-2010)
Value of the company Institutional ownership Dividend Policy Debt Policy companies listed on the Stock Exchange the period 2008-2010
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Author Title Variable Sample Result
Dependent Independent 3 Nuraina (2012) Effect of Institutional Ownership and Firm Size Policy on Debt and Corporate Values
Value of the Coompany Institutional Ownership Companies listed on Indonesia Stock Exchange (IDX) for the period 2006-2008
Institutional ownership has a significant effect on the value of the company. 4 Senda (2013) Effect of Managerial Ownership, Institutional Ownership, Dividend Policy, Profitability, Leverage Financial and Investment Opportunity Set To Value Company
Value of the company Managerial ownership Institutional ownership Dividend Policy 142 companies were taken in the study are manufactur-ing companies listed in Indonesia Stock Exchange Institutional ownership has negative unsignificant relation to firm value
5 Andantara
(2013)
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Author Title Variable Sample Result
Dependent Independent
8 Dian and
Lidyah (2014) Influence of Corporate Social Responsibility, Managerial Ownership, Institutional Ownership and Corporate Value Against Coal Mine Listed in Indonesia Stock Exchange Value of the company Institutional ownership 11 coal mining company listed on the Indonesia Stock Exchange in 2010 to 2012
Institutional ownership significantly influence the value of the company
Nuraina (2012) and Haruman (2008) examined the effect of institutional ownership on firm value on companies listed in the Indonesia Stock Exchange. Their study found that isntitusional ownership has significant positive effect on the value of company.
The research was supported by research from Nurfitri et al., (2014), which examined the the influence of institutional ownership on firm value on companies listed in LQ45, as well as research Sukirni (2012) on companies listed in the Indonesia Stock Exchange. Research conducted Dian and Lidyah (2014) on the coal company, also found that institutional ownership has an effect on firm value.
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III. RESEARCH METHODOLOGY
3.1 Reserach Object
A. Population and Sample
The population in this research are all companies listed in Indonesia Stock Exchange in 2010-2014, as many as 141 companies. Samples were taken from population by purposive sampling method with several criteria must be met as follows:
1. The Company has the proportion of institutional ownership during the period 2010-2014.
2. Companies presents the complete financial report for the period 2010-2014.
3. Value of the Company (PBV) is not negative.
4. Companies that do not have data outliers for each variable.
5. The sample company have the needed information during the period on this study.
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Table 2. Research Sample
Sample Characteristics Emiten
The manufacturing company that listed in Indonesia Stock Exchange in 2010-2014
105 Manufacturing companies which do not have
institutional ownership
(2)
Companies that have a data outlier and the value of the company is negative
(19)
Total research sample 84
Source: data processed
3.2 Research Design
A. Type and Source of Data
The data used in this research is panel data, which the panel data is a combination of time series data and cross section data. Meanwhile, the data used in this research is secondary data. Secondary data is a source of research data obtained by researchers indirectly through an
intermediary medium (obtained and recorded by the other party). The use of secondary data on the basis of the consideration that the
companies studied was go public company, which has the obligation to make financial reporting to parties outside companies.
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3.3 Research Variable and Operational Variable
A. Research Variabel
In this study the variables used consisted of the dependent variable, independent variable, and control variables.
1. Dependent Variable
The dependent variable is the variable that explained or influenced by independent variables. The dependent variable (Y) in this company is the value of companies and is expressed with PBV.
2. Independent Variable
Independent variables are variables that describe or affect other variables. This study uses institutional ownership variable as the independent variable (X1) and expressed with INS.
3. Control Variable
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B. Operational Definition of Variable
1. Dependent Variable
The dependent variable used in this research are the value of
companies. The value of companies is the value that is willing to pay if the company is being sold. Price Book Value is used as a
measurement of the company's value in this research (Wongso, 2013).
( ) =market price per share book value per share
Price to book value or PBV describe how big the market appreciates the book value of shares in a company. The higher this ratio means the market believes in company's prospects. Companies that goes well, generally PBV ratio reaches above one, which indicates that the market value is greater than its book value.
2. Independent Variable
a. Institutional Ownership
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measured by calculate the total shares owned by all institutional ownership to number of shares outstanding (Haruman, 2008).
INS = x100%
3. Control Variable
a. Dividend Policy
Dividend policy in this research is measured by using dummy variables, where DEV = 1, if the companies's share dividend DEV = 0, if the company does not distribute dividends.
b. Debt Policy
Debt policy is a policy of funding from external companies. Measurement in this research is the debt to equity ratio (DER), which is the ratio of debt to equity. Can be formulated as follows (Brigham and Houston, 2006):
= total debt total equity
c. Growth
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expected then the greater operating results generated by a company.
The company's growth is measured using changes in total assets. The company's growth is the difference between the total assets owned by the company in the current period to the previous period divided by the total assets of the previous period (Puspita, 2011).
GRO =
[image:48.595.174.535.427.685.2]Operational variables above can be summarized in Table 3 below:
Table 3. Summary of Definition and Operationalization Variable
Variable Definition Formulation Scale
Value of the Company
Ratio of year-end stock market price and book value of the company
PBV = PS BVS
Ratio
Instititional Ownership
The proportion of shares held by institutions INS = Ratio Dividen Policy Dummy variable Dummy variable
DEV = 1, if the company distributed dividends
DEV = 0, if the company not distributed dividends
Dummy variable
Debt Policy Ratio between
debt to equity =
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3.4 Analysis Tools
A. Descriptive Analysis
Descriptive statistics provide a description of a data from the average value/mean, standard deviation, maximum, and minimum (Ghozali, 2011). It aims to provide an overview of the object under study through the sample data to make a general conclusions, so that the variables used in the study are easier to understand.
B. Multiple Linear Regression Analysis
Multiple linear regression analysis is use to measure the strength of the relationship between two or more variables, and also shows the direction of the relationship between the dependent variable and independent variables (Ghozali, 2011). The equation formulated as follows:
PBV =α+β1INS +β2DEV +β3DER +β4GRO +ε
Description
Y= PBV = Value of the Company X1= INS = Institutional Ownership X2= DEV = Dividend Policy
X3= DER = Debt Policy
X4= GRO = Growth
β1,β2,β3,β4 = Coefficien of Regression
α = Constanta
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This study uses an Eviews software to do the multiple regression models for panel data, where there are three approaches on the panel data, that are:
1. Pooling Least Square
This approach is the simplest approach with two other approaches. With this approach, we can not see the differences between
individuals and differences over time because the intercept and slope of the model are the same (Armida, 2009).
2. Fixed Effect Approach
On this approach, the panel data model has an intercept which may vary for each individual and the time is each cross-section unit is fixed in time series (Armida, 2009).
3. Random Effect Approach
On this approach, the difference between time and individuals are accommodated by error. Error in this approach is divided into error for the individual components, an error for the time component and composite error. This study uses Generalize Least Square (GLS). Advantages of random effect model compared to fixed effect model is the degrees of freedom, are not necessary to estimate the intercept of N cross-sectional (Armida, 2009).
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• Chow Test is a test that is performed to determine whether the model
used is pooled least squares or fixed effect. This test uses F distribution statistics if the value of F statistic is greater than the F table, means this study using a fixed effect approach (Armida, 2009). Ho: Model is usingpooled least squareapproach
H1: Model is usingfixed effectapproach
• Hausman Test is a test that is performed to determine whether the
model used fixed effect or random effect approach. This test using chi-square distribution, whereby if the probability of Hausman smaller
than α (Hausman test results significantly), the model usedis the fixed effect approach (Armida, 2009).
Ho: Model is usingrandom effectapproach H1: Model is usingfixed effectapproach
C. Classical Assumption Testing
Good regression linear model can be regarded as a good model if the model meets the assumptions called classical assumptions. If the value of classical assumptions are met, then the method of estimation will create a Linear Unbiased Estimator and have a minimum variance that is often called BLUE (Best Linear Unbiased Estimator) (Widarjono, 2009).
1. Normality Testing
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is spread normally. A good regression model is the normal distribution of data or nearly normal. This study uses Jarque-Bera to measure whether or not the data is normally distributed (Widarjono, 2013).
To detect whether the residual is normally distributed or not, that is by
comparing the value of Jarque Bera with X2table, namely:
a. If the value JB> X2 table, then the residual distribution is not
normal.
b. If the value JB <X2 table, then the residual normally distributed.
2. Multicollinearity Testing
At a regression model, we often see the close relationship among the independent variables. Multicollinearity test aims to test whether the regression model found a correlation among the independent variables (independent). In a good regression model should not have happened a correlation among the independent variables (Ghozali, 2011). As a rule of thumb, if the correlation coefficient is high at over 0,85 then we assume there is a multicollinearity in the model (Widarjono, 2013).
3. Heteroscedasticity Testing
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difference it called heteroscedasticity. A good regression model that is homoscedasticity or not happen heteroscedasticity (Ghozali, 2011).
Heteroscedasticity testing in this study using the method of White. This method does not require assumptions about the normality of the
disturbance variables. A White test based on the number of samples (n) multiplied by R2that will follow the distribution of chi-squares with the degree of freedom as the independent variable, which not included in the contants of regression auxiliary (Widarjono, 2013).
Criteria for decision-making in this test are:
a. If the value of chi-squares (nR2) count that is smaller than the value of chi-square table (X2) then it is assumed there is no
heteroscedasticity.
b. If the value of squares count is greater than the value of chi-square table (X2) it is assumed that there is heteroscedasticity.
4. Autocorrelation Testing
Autocorrelation test aimed to testing whether a linear regression model was no correlation between bullies error in period t with an error in period t - 1 (previous) (Ghozali, 2011). This study is using the Duwbin-Watson test, to examine wheter there is an autocorrelation or not. The Duebin-Watson test is camparing the DW value with the value in the table at level of k (the number of independent variables), n (number of
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Figure 3. Decision areas of Durbin-Watson Statistical Test. Source: Widarjono (2013)
It can be seen in Figure 3 above, the decision whether or no
autocorrelation that if the DW test> du and DW test <4 - du, we conclude that the proposed model does not occur autocorrelation at a certain significance level (Widarjono, 2013).
D. Hypothesis Testing
1. T-Statistical Testing
T-statistical test basically shows how far the influence of the explanatory/independent variables in explaining the variations of dependent variable individually (Ghozali, 2011).
Hypothesis criteria:
Ho; βi = 0, meaning no significant effect between independent variable on the dependent variable (value companies) individually.
Ha; βi ≠ 0 means there is significant influence between independent
variable on the dependent variable (value companies) individually. 4
dL–4 4–dU
dU
dL 0
Negative
Autocorrelation
Positive
Autocorrelation
Doubtful No Doubtful
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Testing criteria, if t count> t table, Ho is rejected and Ha accepted this means that there is a relationship between independent variables and the dependent variable (value companies).
In the output regression, the partial test can also be done by looking at the value of probability. When the probability value (0,000) <α (0.05) then
the hypothesis is accepted.
2. F-Statistical Testing
According to Ghozali (2011), F-test shows that all independent variables in the model are intended to have the simultaneous effect on the
dependent variable. This test uses additional control variables that were entered into the regression model. The control variables are the dividend policy (DEV), debt policy (DER), and growth (GRO).
Criteria hypothesis:
Ho; βi = 0, means there is no significant effect between the independent variables on the dependent variable (value companies) simultaneously.
Ha; βi ≠ 0 means there is a significant relationship between the
independent variables on the dependent variable (value companies) simultaneously.
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In the output regression, the simultaneous test can also be done by
looking at the value of probability, when the probability value (0,000) <α