Ethnic Diversity, Political Connection and Performance of the Company

Abstract

The objective of this research is to examine the relation of ethnic diversity and political connection towards firm performance. Our sample consist of listed firm in the Indonesian Stock Exchange for the year 2014-2016. We use multiple linear regression to prove our hypothesis. The results of this study shows that ethnic diversity has a negative relation towards firm performance. We also found that political connection is positively related to Firm performance. This result implies that to reach a higher firm performance, shareholder should maintain the ethnic diversity within their board. Furthermoere, hiring a politically connected person within the board is also a favorable choice for increasing the firm performance.