Determinants of disclosure level of related party transactions in Indonesia

Utama, Cynthia Afriani; Utama, Sidharta

doi:10.1057/jdg.2012.15

Cited by 25 publications

(45 citation statements)

References 40 publications

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“…In other words, the disclosure of RPTs aims to prevent firms engaging in valuereducing behavior. In line with La Porta et al (2006), Utama and Utama's (2012) finding that CG practice positively determines the level of RPT disclosure implies that higher-level RPT disclosure is associated with lower likelihood of abusive RPTs. Furthermore, Cheung et al (2009b) find that information disclosure is relatively lower if majority shareholders carry out RPTs that a priori are likely to expropriate the wealth of noncontrolling shareholders.…”

Section: Disclosure Of Rpts As a Moderating Variablesupporting

confidence: 54%

“…Utama and Utama (2012) find that a single measure of CG practice that combines five components of the OECD Principles of CG is better in explaining the variation in disclosure of RPTs than each component run separately.…”

Section: Corporate Governance and Size Of Rptsmentioning

confidence: 81%

“…The empirical research conducted by the Indonesian Institute for Corporate Directorship (IICD) in 2008 also shows that only 75 per cent of the total firms provide complete disclosure of RPTs, especially for transactions that are above one billion rupiah. Utama and Utama (2012) empirically examine and find that CG practice and size of RPTs have positive impacts on the level of RPT disclosure. Our study is different from theirs in that we investigate whether the level of RPT disclosure moderates the effect of size of RPTs on firm value.…”

Section: Disclosure Of Rpts As a Moderating Variablementioning

confidence: 99%

“…Following Utama and Utama (2012), as a measure of RPT disclosure, we refer to Bapepam-LK's Rule No. VIII.G.7 regarding the Guidelines for the Preparation of Financial Statements, especially in the section about RPTs.…”

Section: Rpt Disclosurementioning

confidence: 99%

“…As better CG reduces the size of abusive RPTs, which in effect decreases the size of total RPTs, we argue that the effect of CG on size of RPTs will influence the impact of RPT size on firm value: If CG is effective in reducing RPT size, then the impact of RPT size on firm value can become positive. Utama and Utama (2012) examine the determinants of RPT disclosure in Indonesia and find that CG practice and size of RPTs positively affect the level of RPT disclosure. Our study differs from theirs in that we examine whether the extent of RPT disclosure indicates whether the transactions are carried out for expropriation or efficiency purpose.…”

mentioning

confidence: 99%

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Corporate governance, size and disclosure of related party transactions, and firm value: Indonesia evidence

Utama

Utama²

2013

Int J Discl Gov

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is a research fellow at FEUI. She is also a lecturer in the Bachelor and Master programs at FEUI. Her areas of interest include investment in capital markets, corporate finance and corporate governance. She has authored a number of articles and papers and has presented her research works in international as well as national conference/seminars. Sidharta Utamais a full professor at the University of Indonesia (UI) and is the chairman of the management board of the Indonesian Institute for Corporate Directorship, an NGO aiming to advance good corporate governance practices in Indonesia. He obtained his undergraduate degree in accounting from UI, MBA in finance and information systems from Indiana University, and PhD in accounting from Texas A&M University in 1996. He obtained professional certification as a chartered financial analyst in 1999. At present, he serves as a member of the Tax Oversight Committee, Ministry of Finance, and as a member of the audit committee in a number of listed companies in Indonesia.ABSTRACT This study aims to investigate whether (a) corporate governance (CG) practice has a negative impact on size of Related Party Transactions (RPTs); (b) size of RPTs affects firm value; and (c) better corporate governance practice and higher disclosure on RPTs reduce the negative impact of size of RPTs on firm value. Our sample covers listed companies at the Indonesian Stock Exchange during 2005-2007. We document that better CG significantly reduces the size of RP liabilities and marginally lowers the size of RP assets. Consistent with these findings, we find that size of RPTs has a positive impact on firm value when the transaction involves loans/borrowings from related parties and that it has no impact on firm value when the transaction involves asset placements in related parties. Finally, we find that for companies with less than full disclosure of RPTs, size of RP assets has a negative effect on firm value.

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Section: Disclosure Of Rpts As a Moderating Variablesupporting

confidence: 54%

Section: Corporate Governance and Size Of Rptsmentioning

confidence: 81%

Section: Disclosure Of Rpts As a Moderating Variablementioning

confidence: 99%

Section: Rpt Disclosurementioning

confidence: 99%

mentioning

confidence: 99%

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Corporate governance, size and disclosure of related party transactions, and firm value: Indonesia evidence

Utama

Utama²

2013

Int J Discl Gov

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The Nexus Between Good Corporate Governance Mechanisms and Transparency: Evidence from Indonesian Banking

Risanty,

Kesuma,

Suherman

2024

The AI Revolution: Driving Business Innovation and Research

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Related party transactions and audit fees: the role of the internal audit function

et al. 2017

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Related party transactions (RPTs) are viewed as genuine transactions that rationally fulfil other economic demands of a company. However, RPTs can also be used to transfer wealth from minority shareholders to controlling shareholders. The existence of such transactions may deteriorate financial reporting quality, increase audit risk, and as a result increase audit fees. This study examines the relationship between RPTs and audit fees in Malaysia, where ownership is often concentrated within a controlling family and corporate governance mechanisms are poor. It also investigates the moderating effect of the internal audit function (IAF) on this relationship. We find that external auditors base their fees on the types of RPTs undertaken. Specifically, our results show that audit fees are higher for firms that undertake RPTs involving the sale and purchase of assets, goods, and services. We also document that external auditors rely on the IAF, and thus their fees are lower for firms that undertake RPTs and that have made a large investment in an IAF. Our study is the first to provide evidence that RPTs in Malaysian firms may be abused as a channel to facilitate tunnelling and that the IAF plays a vital role in controlling such transactions.

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Determinants of disclosure level of related party transactions in Indonesia

Cited by 25 publications

References 40 publications

Corporate governance, size and disclosure of related party transactions, and firm value: Indonesia evidence

Corporate governance, size and disclosure of related party transactions, and firm value: Indonesia evidence

The Nexus Between Good Corporate Governance Mechanisms and Transparency: Evidence from Indonesian Banking

Related party transactions and audit fees: the role of the internal audit function

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