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The impact of related party transactions on firm value in Indonesia: moderating role of good corporate governance

Cogent business & management, 2022-12, Vol.9 (1), p.1-23 [Peer Reviewed Journal]

2022 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. 2022 ;2022 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2331-1975 ;EISSN: 2331-1975 ;DOI: 10.1080/23311975.2022.2135208

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  • Title:
    The impact of related party transactions on firm value in Indonesia: moderating role of good corporate governance
  • Author: Abigail, Anita ; Dharmastuti, Christiana
  • Subjects: Accounting ; Adverse selection ; agency theory ; Audits ; Boards of directors ; Conflicts of interest ; Corporate governance ; Decision making ; firm value ; good corporate governance ; Ownership ; Related party transactions ; Stockholders ; Transfer pricing
  • Is Part Of: Cogent business & management, 2022-12, Vol.9 (1), p.1-23
  • Description: In its business operation, a firm may transact with related parties. From an agency theory point of view, agents may use the transaction to maximize the firm value or for personal gain. This study aims to analyze the effect of Related Party Transactions on Firm Value with Good Corporate Governance as moderating variable, represented by the oversight by the majority shareholder and the size of the audit committee. The majority shareholders are divided into three groups: the state-owned company, the foreign-owned company, and the local privately owned company. The study was done using a quantitative analysis method on 58 public companies on Indonesia Stock Exchange included in the LQ45 Stock Index between 2016-2020. The data is processed with the moderated multiple regression model. The result shows no significant relationship exists between Related Party Transactions on Firm Value. The Detrimental Related Party Transactions only become significant on Firm Value when moderated by the state majority ownership. Meanwhile, the Beneficial Related Party Transactions only become significant on Firm Value when moderated by the foreign majority ownership. This study recommends that state-owned companies strengthen the application of their good corporate governance and execute related party transactions only when it adds to the firm value. Managers of foreign companies are advised not to rely entirely on related party transactions with shareholders or sister companies.
  • Publisher: Abingdon: Taylor & Francis
  • Language: English
  • Identifier: ISSN: 2331-1975
    EISSN: 2331-1975
    DOI: 10.1080/23311975.2022.2135208
  • Source: Taylor & Francis (Open access)
    ROAD: Directory of Open Access Scholarly Resources
    ProQuest Central
    DOAJ Directory of Open Access Journals
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