Mohammad Syafik

The Effect of Institutional Ownership and Foreign Ownership on Company Performance

Introduction

The effect of institutional ownership and foreign ownership on company performance. Analyze the effect of institutional and foreign ownership on mining company performance on the IDX (2016-2022). Institutional ownership positively impacts performance, foreign ownership does not.

Abstract

Recently, the performance of mining companies has been sluggish, so it is necessary to know the cause of the decline in performance. The presence of ownership types is believed to play an important role in improving company performance. So this study aims to test the effect of institutional ownership and foreign ownership on company performance. The formulation of the research problem is (1) does institutional ownership have a positive effect on company performance? (2) does foreign ownership have a positive effect on company performance? The population used in this study is mining companies listed on the Indonesia Stock Exchange (IDX). The samples taken are mining companies listed on the IDX during the period 2016 to 2022. The total research sample is 253 observations determined through purposive sampling. The analysis method of this study uses multiple regression analysis techniques. Based on the results of the analysis, it can be concluded that institutional ownership has a positive effect on company performance with a significance value of 0.097, but foreign ownership has a significance value of 0.545 so that it does not affect company performance. This study can improve further research literature studies and can be used by company management in considering the right type of ownership in order to maximize company performance.

Review

This study addresses a pertinent topic regarding company performance, particularly in the context of the currently sluggish mining sector, by investigating the roles of institutional and foreign ownership. The research clearly articulates its objective: to test the effect of these ownership types on company performance, framed by two specific research questions. The focus on Indonesian mining companies listed on the IDX for a substantial period (2016-2022) with a decent sample size of 253 observations provides a valuable contextual backdrop. The abstract efficiently presents the core findings, concluding that institutional ownership positively affects performance, albeit at a borderline significance level (p=0.097), while foreign ownership shows no significant effect. Despite its clear objectives, the abstract exhibits several limitations that hinder a thorough evaluation of the study's robustness. Crucially, the abstract omits the specific measures used for "company performance" and the operationalization of "institutional ownership" and "foreign ownership." Without knowing if performance was measured by accounting ratios (e.g., ROA, ROE) or market-based metrics (e.g., Tobin's Q), or how ownership percentages were calculated, it is difficult to assess the validity and comparability of the findings. Furthermore, while multiple regression analysis is stated, the abstract does not mention whether any control variables (e.g., firm size, age, leverage) were included. The absence of control variables could lead to spurious correlations and limit the confidence in the causal inferences drawn. The borderline significance level for institutional ownership (p=0.097) also warrants further discussion on its practical implications and consistency with broader literature. The study concludes with practical implications for company management regarding ownership strategies to maximize performance, particularly in the context of institutional ownership. To enhance its contribution to literature, future research building on this study would benefit from explicitly defining all variables, including crucial control variables, and situating the findings within established theoretical frameworks like agency or stewardship theory. Exploring different measures of company performance, disaggregating ownership types further (e.g., by type of institutional investor), or investigating potential mediating or moderating factors in the ownership-performance relationship would also enrich the understanding of this complex dynamic. Further research could also delve into the specific characteristics of the Indonesian mining sector that might explain the differential impact of ownership types.

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