Political Connections, Board Size, and Firm Performance: Evidence from Indonesian Listed State-Owned Enterprises

Abstract

Political connections and board size are central
corporate governance issues in publicly listed state-owned
enterprises (SOEs), where government ownership and political
involvement may shape corporate decision-making. Prior studies
report inconsistent findings on how political connections and
board size relate to firm performance, and evidence focusing on
Indonesian listed SOEs remains limited. This study therefore
examines the effects of political connections and board size on the
firm performance of publicly listed SOEs in Indonesia during
2020–2024. Using secondary data from the Indonesia Stock
Exchange and company annual reports, and purposive sampling,
it analyzes 40 firm-year observations from eight non-financial
listed SOEs. Firm performance is measured by return on assets
(ROA), political connections by a dummy variable indicating at
least one politically connected commissioner, and board size by
the number of commissioners. The data are analyzed using
descriptive statistics, classical assumption tests, and multiple
linear regression. The results show that political connections and
board size both have positive and significant effects on firm
performance, and the model explains 37.3% of the variation in
ROA (adjusted R² = 0.373). The findings contribute to Agency
Theory and Resource Dependence Theory by showing that
political connections and board size can function as strategic
resources in Indonesian listed SOEs. Practically, they underline
the importance of managing political connections transparently
and maintaining an effective board size. Given the small sample,
the results should be interpreted with caution.

Keywords: Political Connections; Board Size; Firm Performance;
Return on Assets; State-Owned Enterprises.