Board Structure Problem in Aviation Companies: The Relationship of Political Connection and Multiple Directorship on Firm Performance

Marsya Chikita Lestari, Cynthia Afriani Utama


This study analyzes the relationship between the political connection and multiple directorships of aviation companies’ board members and their firm performance. This research will focus on companies in the aviation sector on a broader subsector than previous studies. It will help the shareholder of the aviation companies determine board structure policies and evaluate the implementations conducted so far. This research uses descriptive statistics and regression analysis for the panel data model. Moreover, this study uses a purposive sampling technique secondary data from the aviation company’s annual reports in the Asia continent for the 2016-2020 period. The results show that the multiple directorships negatively affect firm performance in aviation companies while the board’s political connections positively affect firm performance, measured by its Return on Equity (ROE). In contrast, the multiple directorships and political connections do not impact aviation companies' firm performance measured by their Return on Assets (ROA). Overall, this study in the Asia continent asserts the previous study where the political connection positively affects the airline’s firm performance in the US. The result can support the corporate governance practice of deciding board structure in the aviation sectors in Asia in terms of political connection and multiple directorships.

DOI: 10.26905/jkdp.v25i3.5892


Aviation Industry; Firm Performance; Multiple Directorships; Political Connection.

Full Text:



Adetunji, O. M., & Owolabi, A. A. (2016). Firm Performance and Its Drivers: How Important Are the Industry and Firm-Level Factors? International Journal of Economics and Finance, 8(11), 60.

Air Transport Action Group. (2021). Facts and Figures.

Alejo, J., Montes-Rojas, G., & Sosa-Escudero, W. (2015). Tests for Normality in Linear Panel Data Models. Stata Journal, 15(3), 822–832.

Arifin, T., Hasan, I., & Kabir, R. (2020). Transactional and relational approaches to political connections and the cost of debt. Journal of Corporate Finance, 65, 101768.

Aydın Unal, E., Unal, Y., & Isık, O. (2017). The Effect of Firm Size on Profitability: Evidence From Turkish Manufacturing Sector. Pressacademia, 6(4), 301–308.

Bollmann, G., Rouzinov, S., Berchtold, A., & Rossier, J. (2019). Illustrating Instrumental Variable Regressions Using the Career Adaptability - Job Satisfaction Relationship. Frontiers in Psychology, 10, 1481.

Brogaard, J., Denes, M., & Duchin, R. (2021). Political Influence and the Renegotiation of Government Contracts. The Review of Financial Studies, 34(6), 3095–3137.

Brogaard, J., & Detzel, A. (2015). The Asset-Pricing Implications of Government Economic Policy Uncertainty. Management Science, 61(1), 3–18.

Brown, R. S. (2016). Management Lobbying, political connectedness and financial performance in the air transportation industry. Journal of Air Transport Management, 54, 61–69.

Chee, K. D., & Tham, Y. H. (2021). The role of directors with multiple board seats and earnings quality: A Singapore context. Journal of Corporate Accounting & Finance, 32(1), 31–47.

Daoud, J. I. (2017). Multicollinearity and Regression Analysis. Journal of Physics: Conference Series, 949, 12009.

Eloff, J. J., & Cohen, J. P. (2015). Airport Infrastructure Investment: Strategic Interaction or Strategic Allocation? Transportation Research Record, 2471(1), 26–32.

Harymawan, I., Nasih, M., Ratri, M. C., & Nowland, J. (2019). CEO busyness and firm performance: evidence from Indonesia. Heliyon, 5(5), e01601–e01601.

Hundal, S. (2017). Multiple directorships of corporate boards and firm performance in India. Corporate Ownership and Control, 14, 150–164.

Ibhagui, O. W., & Olokoyo, F. O. (2018). Leverage and firm performance: New evidence on the role of firm size. The North American Journal of Economics and Finance, 45, 57–82.

Ibhagui, O. W., Olokoyo, F. O., Lee, S., Vithessonthi, C., & Tongurai, J. (2018). The effect of firm size on the leverage–performance relationship during the financial crisis of 2007–2009. Journal of Multinational Financial Management, 29(1), 607–625.

King Committee on Corporate Governance. (2016). KIng IV Report on Corporate Governance for South Africa.

Lee, S. (2018). Growth, profits and R&D investment. Economic Research-Ekonomska Istraživanja, 31(1), 607–625.

Manna, A., Sahu, T. N., & Pandey, K. D. (2020). Board size, multiple directorship and performance of Indian listed firms. International Journal of Economics and Business Research, 19(2), 111–129.

Mazzola, E., Perrone, G., & Kamuriwo, D. S. (2016). The interaction between inter-firm and interlocking directorate networks on firm’s new product development outcomes. Journal of Business Research, 69(2), 672–682.

Mckinsey & Company. (2020). Covid-19 : Global Health and Crisis Response.

Morrisan, M. A. (2019). Metode Penelitian Survei. Kencana.

Moscone, F., & Tosetti, E. (2015). Robust estimation under error cross section dependence. Economics Letters, 133, 100–104.

Ooi, E. (2020). Directors who serve multiple pension funds : Are they conflicted or skilled ? Journal of Banking and Finance, 113, 105764.

Pek, J., Wong, O., & Wong, A. C. M. (2018). How to Address Non-normality: A Taxonomy of Approaches, Reviewed, and Illustrated. Frontiers in Psychology, 9, 2104.

Pesaran, M. H. (2015). Time Series and Panel Data Econometrics. Oxford University Press.

Pillai N., V. (2016). Panel Data Analysis with Stata Part 1 Fixed Effects and Random Effects Models.

Preuss, S., & Königsgruber, R. (2021). How do corporate political connections influence financial reporting? A synthesis of the literature. Journal of Accounting and Public Policy, 40(1), 106802.

Rizka, Z. (2019). Estimation Model And Selection Method Of Panel Data Regression : An Overview Of Common Effect, Fixed Effect, And Random Effect Model.

Rosana, F. C. (2020). Erick Thohir Stated His Reason In Appointing Triawan Munaf as Garuda’s President Commissioner. Tempo.

Saleh, M. W. A., Shurafa, R., Shukeri, S. N., Nour, A. I., & Maigosh, Z. S. (2020). The effect of board multiple directorships and CEO characteristics on firm performance: evidence from Palestine. Journal of Accounting in Emerging Economies, 10(4), 637–654.

Seissian, L. A., Gharios, R. T., & Awad, A. B. (2018). Structural and market-related factors impacting profitability: A cross sectional study of listed companies. Arab Economic and Business Journal, 13(2), 125–133.

Subramaniam, V., & Wasiuzzaman, S. (2019). Geographical diversification, firm size and profitability in Malaysia: A quantile regression approach. Heliyon, 5(10), e02664.

Tangel, A. (2019). Boeing Strips CEO Of Chairman’s Job. The Wallstreet Journal.

Taouab, O., & Issor, Z. (2019). Firm Performance: Definition and Measurement Models. European Scientific Journal ESJ, 15(1), 93–106.

Terjesen, S., Couto, E. B., & Francisco, P. M. (2016). Does the presence of independent and female directors impact firm performance? A multi-country study of board diversity. Journal of Management & Governance, 20(3), 447–483.

The Chartered Governance Institute. (2020). What is corporate governance?

Veazie, P. J. (2015). Understanding Statistical Testing. SAGE Open, 5(1), 2158244014567685.

Vithessonthi, C., & Tongurai, J. (2015). The effect of firm size on the leverage–performance relationship during the financial crisis of 2007–2009. Journal of Multinational Financial Management, 29, 1–29.

Vo, D., & Nguyen, T. (2014). The Impact of Corporate Governance on Firm Performance: Empirical Study in Vietnam. International Journal of Economics and Finance, 6.

Wang, Y., Yao, C., & Kang, D. (2018). Political connections and firm performance: Evidence from government officials’ site visits. Pacific-Basin Finance Journal, 57.

Wardana, S. (2019). Erick Thohir “surprised” that an SOE director served in six other commissioner seats at once. The Jakarta Post.

Wati, L. N. (2017). Board of commissioner’s effectiveness on politically connected conglomerates: Evidence from Indonesia. Pertanika Journal Social Sciences & Humanities, 25, 255–270.

Wintoki, M. B., Linck, J. S., & Netter, J. M. (2012). Endogeneity and the dynamics of internal corporate governance. Journal of Financial Economics, 105(3), 581–606.

Wong, W.-Y., & Hooy, C.-W. (2018). Do types of political connection affect firm performance differently? Pacific-Basin Finance Journal, 51, 297–317.



  • There are currently no refbacks.

Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 813-3180-1534

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0