EMPLOYEE STOCK OPTION PLAN (ESOP), CORPORATE GOVERNANCE, AND FAMILY OWNERSHIP: EVIDENCE FROM INDONESIA

• Main Author: Zulfa, Anastasia
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/40912
• Institution: Institut Teknologi Bandung

The objective of this study is to investigate whether corporate governance practices affect the issuance of share-based compensation and its motive in form of Employee Stock Option Plan (ESOP) in publicly listed family firms in Indonesia. Previous research regarding the issuance of ESOPs proved that corporate governance practices influence the firm to issue compensation in order to mitigate agency conflict which often occurs in firms with dispersed ownership. However, in a concentrated ownership such as family-owned firms with family members in board members or even family CEO already have their interests aligned. Therefore, issuance of ESOP in family firms may fall to two purposes: rent extraction or longterm value maximizing. A collection of companies listed in Indonesian Stock Exchange issued ESOP during 2013-2018 period is taken as sample. Using panel data regression, the research found that family ownership, independent commissioners, and board meetings frequency are significantly affect ESOP granting in family firms. With alternative measurement of dummy variable of family ownership, we found only board meetings that are significant towards grant of ESOPs, number of ESOPs granted, and ESOP’s vesting period in family and nonfamily firms. The ESOPs granted in family firms are tend to be at/out-of-the-money ESOP, indicating a firm’s goal on value-maximizing. Moreover, the research also found that the presence of family ownership in a firm affects the likelihood to grant in-the-money ESOPs.