The Impact of Holding Strategy and Asset Restructuring on the Performance of Indonesia’s State-owned Enterprises

Business mergers enable firms to produce more efficiently, diversify product lines or expand their operations. Indonesia’s economic growth has triggered the establishment of several multi-business firms over the past 30 years. These firms continue to develop their businesses in both related and unrelated fields. To manage their portfolios, these firms operate under holding companies. Contemporary business strategy development requires firms, including multi-business conglomerates, to be more effective and efficient. This study aims to examine and analyze the impact of holding formation and asset restructuring on state-owned enterprise (SOE) performance and to compare the financial performance of SOEs before and after holding formation. This study offers three novel contributions. First, it is the first empirical examination of SOE mergers in Indonesia. Second, it employs Monte Carlo simulation to project future performance, particularly for mergers that occurred during 2020–2021. This simulation approach was necessary because some sampled firms had not yet reached sufficient post-merger periods, whereas effect formation typically becomes apparent several years after a merger. Third, this study uses both cross-sectional and time-series dummy variable tests to obtain more robust results. The findings indicate that merger synergies fail to materialize when measured using both regression and pairwise comparison methods.