The Influence of Foreign Investors and Board Ownership on Corporate Risk Taking Behavior with Size and Leverage as Moderating Variables

Oct 13, 2025 by talynt.org 130 views

The Influence of Foreign Investors and Board Ownership on Corporate Risk Taking Behavior with Size and Leverage as Moderating Variables

Introduction

In today's era of globalization, companies in Indonesia are increasingly open to foreign investment, which has various impacts on managerial behavior and risk taking. The risk of taking risk of a company is important in determining business strategies and sustainability. Foreign investors often bring different perspectives and strategies in decision making, while ownership of the council can influence company policies internally. This study aims to analyze the effect of foreign investors and ownership of the council on the risk of taking the risk of non-financial companies listed on the Indonesia Stock Exchange. In addition, this research also investigates whether the size and leverage can function as a moderation variable in the relationship.

Research Background

The risk of taking risk of a company is a crucial aspect of business strategy and sustainability. Companies that take calculated risks can reap significant rewards, while those that fail to take risks may struggle to stay competitive. Foreign investors often bring different perspectives and strategies in decision making, which can influence a company's risk taking behavior. Ownership of the council can also play a significant role in determining company policies and risk taking behavior. By using data from non-financial companies listed on the Indonesia Stock Exchange during the 2015-2018 period, this research uses quantitative analysis methods with SmartPLS4 software to process data obtained from the audited company's financial statements.

The Effect of Foreign Investors and Board Ownership on Company Risk Taking Behavior

The results of this study show that foreign investors and board ownership have a negative and significant influence on the behavior of company risk taking. This suggests that the existence of foreign investors and ownership by the council can limit the courage of the company in taking risks. This may be due to caution in strict management and supervision. Foreign investors may be more risk-averse due to their limited knowledge of the local market and regulatory environment. Similarly, board ownership may be more conservative in its risk taking behavior due to its focus on maintaining stability and avoiding potential losses.

The Role of Company Size in Risk Taking Behavior

Conversely, company size shows positive and significant effects on risk taking behavior. This suggests that larger companies tend to be more able to take risks. This may be because they have more resources to overcome the likelihood of losses. Larger companies may also have more experience and expertise in managing risk, which can enable them to take on more risk. Additionally, larger companies may have more access to capital and other resources, which can provide them with the necessary funds to take on more risk.

The Effect of Leverage on Risk Taking Behavior

On the other hand, leverage shows a negative but not significant effect on risk taking behavior. This indicates that companies with higher debt do not always show greater risk taking behavior. This may be due to interest expenses and financial obligations that must be met. Companies with high levels of debt may be more cautious in their risk taking behavior due to the potential risks associated with high levels of debt. However, this does not necessarily mean that companies with high levels of debt are less likely to take risks.

Size and Leverage Moderation

This study also found that size can moderate the relationship between foreign investors and risk taking behavior, but not for ownership of the council. This means that a larger company can reduce the negative impact of foreign investors on risk taking. However, leverage is unable to moderate the relationship between foreign investors and risk taking behavior, or between board ownership and risk taking behavior. This suggests that the company's capital structure, although important, does not always play a role in determining how much risks taken by the company in the context of the influence of foreign investors and board ownership.

Conclusion

Overall, this research provides an important insight into how foreign investors and ownership of the council affect the behavior of company risk taking in Indonesia. The negative influence of the two can be a consideration for companies to be more careful in making strategic decisions. In addition, the role of size as a moderation variable shows that external and internal factors need to be considered in risk taking. In the future, companies need to understand this dynamics and manage their ownership structures and existing resources in order to be able to optimize their risk taking behavior effectively.

Implications of the Study

The findings of this study have several implications for companies, investors, and policymakers. Firstly, companies need to be aware of the potential risks associated with foreign investors and board ownership. They need to carefully consider the potential impact of these factors on their risk taking behavior and adjust their strategies accordingly. Secondly, investors need to be aware of the potential risks associated with investing in companies with high levels of foreign ownership. They need to carefully consider the potential impact of these factors on the company's risk taking behavior and adjust their investment strategies accordingly. Finally, policymakers need to be aware of the potential impact of foreign investors and board ownership on the risk taking behavior of companies in Indonesia. They need to carefully consider the potential implications of these factors and adjust their policies accordingly.

Limitations of the Study

This study has several limitations that need to be considered. Firstly, the study only focuses on non-financial companies listed on the Indonesia Stock Exchange. Secondly, the study only uses data from the 2015-2018 period. Finally, the study only uses quantitative analysis methods. Future studies can build on this study by using a more comprehensive sample, a longer time period, and a more comprehensive research design.

Future Research Directions

This study provides several avenues for future research. Firstly, future studies can build on this study by using a more comprehensive sample and a longer time period. Secondly, future studies can use a more comprehensive research design, including both quantitative and qualitative methods. Finally, future studies can investigate the impact of other factors on the risk taking behavior of companies in Indonesia, such as corporate governance, executive compensation, and industry characteristics.
Q&A: The Influence of Foreign Investors and Board Ownership on Corporate Risk Taking Behavior

Q: What is the main focus of this study?

A: The main focus of this study is to analyze the effect of foreign investors and ownership of the council on the risk of taking the risk of non-financial companies listed on the Indonesia Stock Exchange.

Q: What are the key findings of this study?

A: The key findings of this study are that foreign investors and board ownership have a negative and significant influence on the behavior of company risk taking. Additionally, company size shows positive and significant effects on risk taking behavior, while leverage shows a negative but not significant effect on risk taking behavior.

Q: What is the role of size in moderating the relationship between foreign investors and risk taking behavior?

A: The study found that size can moderate the relationship between foreign investors and risk taking behavior, but not for ownership of the council. This means that a larger company can reduce the negative impact of foreign investors on risk taking.

Q: What is the implication of this study for companies?

A: The findings of this study have several implications for companies. Firstly, companies need to be aware of the potential risks associated with foreign investors and board ownership. They need to carefully consider the potential impact of these factors on their risk taking behavior and adjust their strategies accordingly.

Q: What is the implication of this study for investors?

A: The findings of this study have several implications for investors. Firstly, investors need to be aware of the potential risks associated with investing in companies with high levels of foreign ownership. They need to carefully consider the potential impact of these factors on the company's risk taking behavior and adjust their investment strategies accordingly.

Q: What is the implication of this study for policymakers?

A: The findings of this study have several implications for policymakers. Firstly, policymakers need to be aware of the potential impact of foreign investors and board ownership on the risk taking behavior of companies in Indonesia. They need to carefully consider the potential implications of these factors and adjust their policies accordingly.

Q: What are the limitations of this study?

A: The study has several limitations that need to be considered. Firstly, the study only focuses on non-financial companies listed on the Indonesia Stock Exchange. Secondly, the study only uses data from the 2015-2018 period. Finally, the study only uses quantitative analysis methods.

Q: What are the future research directions based on this study?

A: The study provides several avenues for future research. Firstly, future studies can build on this study by using a more comprehensive sample and a longer time period. Secondly, future studies can use a more comprehensive research design, including both quantitative and qualitative methods. Finally, future studies can investigate the impact of other factors on the risk taking behavior of companies in Indonesia, such as corporate governance, executive compensation, and industry characteristics.

Q: What are the practical implications of this study for companies and investors?

A: The practical implications of this study are that companies and investors need to be aware of the potential risks associated with foreign investors and board ownership. They need to carefully consider the potential impact of these factors on their risk taking behavior and adjust their strategies accordingly.

Q: What are the policy implications of this study?

A: The policy implications of this study are that policymakers need to be aware of the potential impact of foreign investors and board ownership on the risk taking behavior of companies in Indonesia. They need to carefully consider the potential implications of these factors and adjust their policies accordingly.

Q: What are the future research directions for this study?

A: The future research directions for this study are to investigate the impact of other factors on the risk taking behavior of companies in Indonesia, such as corporate governance, executive compensation, and industry characteristics. Additionally, future studies can use a more comprehensive research design, including both quantitative and qualitative methods.