The Role of Leadership in Improving the Effectiveness of Financial Management in Family Companies

Abstract

Family businesses play a crucial role in the global economy, making significant contributions to employment and GDP. However, many family businesses face challenges in managing their finances effectively, especially during intergenerational transitions, strategic financial decision-making, and operational professionalism. This study aims to analyze the role of leadership in improving the effectiveness of financial management in family companies, focusing on the factors that influence financial decision-making by family business leaders. This study uses a qualitative research method with a case study approach. Data were collected through semi-structured interviews, participatory observations, and document analysis from five family businesses in Indonesia. The research focuses on companies that have been in operation for over 10 years and have had more than one generation of leaders. The results show that effective leadership, which includes transparency, good communication with the finance team, and openness to change, plays a crucial role in enhancing more efficient financial management. Companies led by the second and third generations tend to adopt more modern managerial practices, which improve financial decision-making and corporate sustainability. These findings provide practical insights for family business leaders on the importance of good leadership in financial management. This research also provides recommendations for policymakers and practitioners to support the growth and sustainability of family companies in Indonesia. Furthermore, this research contributes to the academic literature on leadership and financial management in family-owned companies.