Abnormal Related Party Transactions, Political Connection, and Firm Value: Evidence from Indonesian Firms

  • Supatmi Supatmi Satya Wacana Christian University
  • Sutrisno Sutrisno Brawijaya University
  • Erwin Saraswati Brawijaya University
  • Bambang Purnomosidhi Brawijaya University
Keywords: Abnormal Related Party Transaction, Political Connection, Firm Value, Agency Theory, Resource Dependence Theory, Indonesia


This study aims to examine the effect of abnormal related party transactions (RPTs) on firm value and to investigate political connections as a moderator of the causal relationship. Our sample is 450 Indonesian firms listed at the Indonesia Stock Exchange during the period of 2014–2017 with a total of 1,724 firm-year observations. Based on the panel data regression test, our results demonstrate that abnormal RPTs, especially account receivables-related RPTs and account payables-related RPTs, decrease firm value. Further, the results empirically show that political connections negatively affect firm value. Political connections strengthen the effects of abnormal non-account receivable RPT assets and abnormal non-account payable RPT liabilities on firm value. Our findings imply that agency theory explains the impacts of political connections of Indonesian firms better than resource dependence theory.


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How to Cite
Supatmi Supatmi, Sutrisno Sutrisno, Erwin Saraswati, & Bambang Purnomosidhi. (2021). Abnormal Related Party Transactions, Political Connection, and Firm Value: Evidence from Indonesian Firms. International Journal of Business and Society, 22(1), 461-478. https://doi.org/10.33736/ijbs.3189.2021