Agency vs. Stewardship Theory in Operational Risk Management: A Comparative Panel Data Analysis of Family and Non-Family Firm

Abstract

This study examines the asymmetric impacts of financial determinants—Growth Opportunity, Operating Cash Flow, Liquidity, and Leverage on operational risk (EBITDA volatility), and analyzes the moderating role of Institutional Ownership across different governance structures. Investigating 36 companies within the Consumer Non Cyclicals sector listed on the Indonesia Stock Exchange Main Board for the 2021–2025 period, the study executes a multi level analysis combining an aggregate market baseline (180 observations) with an asymmetrical split sample approach separating family firms (30 firms, 150 observations) and non family firms (6 firms, 30 observations) using the Random Effects Model with Robust Standard Errors. The findings reveal that aggregate baseline models obscure critical structural realities. In the aggregate market and non family firms, institutional ownership acts as an effective external monitoring mechanism that mitigates expansion driven risks, providing strong validation for Agency Theory. Conversely, in family firms governed by Stewardship values and Socioemotional Wealth, aggressive growth and internal cash retention heighten operational volatility. Furthermore, while leverage acts as a crucial internal disciplinary anchor in family firms, heavy institutional monitoring disrupts their informal governance networks, creating strategic friction that significantly amplifies EBITDA volatility. The study concludes that the transmission channels of financial determinants in mitigating operational risk are highly conditional upon the underlying ownership architecture, highlighting the necessity of integrating sociological dimensions into corporate financial risk assessments.