Determinats Of The Amount Of Related Party Transaction: Tax Expense And Institutional Ownership

Abstract

This research is testing whether tax expense and institutional ownership have an influence on the amount of Related Party Transactions (RPT) both related to sales and expense (RPTSE). The population in this research is manufacturing companies listed on the Indonesia Stock Exchange with a total sample of 174 out of 58 manufacturing companies with research period in 2016-2018. By using panel data regression analysis, the results showed indicate that the tax expense of the previous year has a significant positive effect on the amount of related party transactions related to sales and expenses (RPTSE). This shows that the tax expense can encourage companies to conduct related party transactions in the following year. Meanwhile, institutional variables do not have a significant effect on related party transactions related to sales and expense (RPTSE).Practically, related party transactions are relatively complex, so that institutional ownership does not guarantee tomonitor of these transactions.

Determinant of the Amount of Related Party Transaction: Influences Tax Expense and Institutional Ownership

“…The company's tax expense has to pay the company's return for more profit. So, if the company tends to conduct related party transactions, this is often done by the case of transfer pricing through reducing the income from deals by dealing below the fair prices so that it will affect the small company gains that will be taxed (Soraya & Rachmawati, 2020). Related Party Transaction is recognized as a company's commitment to more efficiently coordinate and allocate resources among its subsidiaries, so Related Party Transaction is expected to yield results with better company performance (Pratama, 2018).…”

“…Stakeholders are linked between principals (shareholders) and agents (administrators) (Jensen, M., & Meckling, 1976). The agency's problem is alleviated because it comes from the shareholders who manage the business management operating which is the company with the aims expected by the shareholders (Soraya & Rachmawati, 2020).…”

“…This will be mischievous to adolescent shareholders because the impact of the company becomes a loss so it affects the value of the shares of adolescent shareholders because the gains are transferred to related party transactions. It was also mischievous to state for levies entered are reduced (Soraya & Rachmawati, 2020).…”

“…Grounded on the preface and background exploration, the main goal of this study is to examine the correlation between the tax expense and institutional ownership on the amount of related party transactions empirically. This study develops (Soraya & Rachmawati, 2020) about determinants of the amount of related party transaction on effect tax expense and institutional ownership. So, the result of this research determines the amount of related party transactions in a company contains tax expense factors and institutional ownership, especially for general companies or using consumer of goods companies.…”

“…To solve this problem, we use year over year using the previous year's tax expense to show the actions management takes in the face of the high ETR by the previous year tend to engage in abusive related party transactions. Based on this section and explanation, the first hypothesis is based on research by (Soraya & Rachmawati, 2020).…”