Valuation Determinants of Family Real Estate Business: Empirical Evidence in the Indonesian Stock Exchange

Abstract

This study investigates the factors influencing the valuation of fourteen family-owned real estate firms listed on the Indonesia Stock Exchange between 2017 and 2020. Performance and market conditions influence the Tobin's Q value of the companies. The return on assets is the performance factor. The market condition factor is the growth index of the stock market. The performance of a business is influenced by family ownership, board composition (family involvement), and capital structure. SmartPLS was used to analyze the data in this investigation. Notably, our research reveals. The performance of a company determines its value, with market conditions serving as a moderating influence. Moreover, the research demonstrates that family ownership, family participation on the board of directors, and capital structure positively and substantially affect firm performance.

Purpose – The study examines the determinants of firm valuation of 14 listed real estate family businesses on the Indonesia Stock Exchange, also known as IDX, from 2017 to 2020. Company value using Tobin's Q is affected by performance and market conditions. The performance factor is the return on assets, and the market condition factor is the stock exchange index.

Design/methodology/approach – The data sources are from the Indonesian Capital Market Directory (ICMD) and company annual reports year 2017 to 2020. The method is quantitative and SmartPLS process the data.

Findings – The value of a family-owned real estate company goes up when the company does well, and the market is good. On the other side, family ownership, family involvement in the Board of Directors, and capital structure positively influence firm performance.

Research limitations/implications – The implications and limitations are that company performance is only measured by ROA, and many other factors may add to it. The firm value measured other than Tobin's Q or share price. Many other independent variables may cause company performance in family companies.

Originality/value – This study investigates the effects of family mechanisms on the performance and value of a family business in Indonesia. The data serve as an indicator of firm performance, and family ownership interests, both accounting- and market-based, seek to increase the firm value.