Do related party transactions matter for firm performance? LQ 45 firm perspective
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Dec 7, 2023
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Abstract
This study aims to provide empirical evidence regarding whether related party transactions (RPTs) are really a matter for company financial performance. It also investigates other possible factors that may influence firm performance such Covid 19 pandemic situation, company size and sales growth. The samples are obtained from companies recorded in the LQ 45 index in 2019 which were studied from 2018 to 2021. The results shows that RPTs do not significantly influence firm performance. This happens because companies do not rely on related party relationships in the sales or purchasing process. In addition, Covid 19 and company size have a significant negative impact on ROE and ROA. Whereas sales growth has a significant positive relationship on firm performance. This indicates that having a large asset investment does not guarantee an increase in the company's financial performance. A strategy that focuses on increasing sales will be more profitable
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How to Cite
Puspitasari, N. F. D., Solihat, I., & Nisrina Sari, N. (2023). Do related party transactions matter for firm performance? LQ 45 firm perspective . Enrichment : Journal of Management, 13(5), 2726-2734. https://doi.org/10.35335/enrichment.v13i5.1653
References
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Bansal, S., & Thenmozhi, M. (2020). Does Concentrated Founder Ownership Affect Related Party Transactions? Evidence from an Emerging Economy. Research in International Business and Finance, 53. https://doi.org/10.1016/j.ribaf.2020.101206
Devi, S., Warasniasih, N. M. S., & Masdiantini, P. R. (2020). The Impact of COVID-19 Pandemic on the Financial Performance of Firms on the Indonesia Stock Exchange. Journal of Economics, Business, & Accountancy Ventura, 23(2). https://doi.org/10.14414/jebav.v23i2.2313
Dewan Standar Akuntansi Keuangan. (2015). PSAK No. 7 (revisi 2015): Pengungkapan Pihak-Pihak Berelasi. Jakarta: Ikatan Akuntan Indonesia
Fang, J., Lobo, G. J., Zhang, Y., & Zhao, Y. (2018). Auditing related party transactions: Evidence from audit opinions and restatements. Auditing, 37(2), 73–106. https://doi.org/10.2308/ajpt-51768
Gordon, E., Henry, E., Louwers, T., & Reed, B. (2007). Auditing related party transactions: A literature overview and research synthesis. Accounting Horizons, 21(1), 81–102.
Hendratama, T. D., & Barokah, Z. (2020). Related party transactions and firm value: The moderating role of corporate social responsibility reporting. China Journal of Accounting Research, 13(2), 223–236. https://doi.org/10.1016/j.cjar.2020.04.002
International Accounting Standard Board (IASB). (2023). International Accounting Standard 24 Related Party Disclosure. Retrieved from https://www.ifrs.org/issued-standards/list-of-standards/ias-24-related-party-disclosures/#about
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Kasmir. (2012). Analisis Laporan Keuangan, edisi ketujuh, PT. Raja Grafindo Persada, Jakarta.
Khanna, T., & Palepu, K. (2000). Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups.
Krajewski, M., Frąckowiak, M., Kubacka, M., & Rogowski, Ł. (2021). The bright side of the crisis. The positive aspects of the COVID-19 pandemic according to the Poles. European Societies, 23(S1), S777–S790. https://doi.org/10.1080/14616696.2020.1836387
Lim, B. L., & Yen, S. H. (2011). Agency Problem and Expropriation of Minority Shareholders Malaysian. Malaysian Journal of Economic Studies, 48(1), 37–59.
Okoro, G. E., & Jeroh, E. (2016). Does Related-Party Transactions Affect Financial Performance of Firms in Nigeria? (Evidence from Publicly Quoted Firms). Business Trends, 6(2), 47–53.
Prawoto, N., Priyo Purnomo, E., & Zahra, A. A. (2020). The Impacts of Covid-19 Pandemic on Socio-Economic Mobility in Indonesia. In International Journal of Economics and Business Administration: Vol. VIII (Issue 3).
Rivai, H.V., Basir S., Sudarto, S.S, dan Veithzal, A.P. (2013). Commercial Bank Management: Manajemen Perbankan dari Teori ke Praktik. Jakarta: Raja Grafindo Persada.
Ryngaert, M., Thomas, S. (2012). Not all related party transactions (RPTs) are the same: ex ante versus ex post RPTs. J ournal of Accounting Research 50(3), 845–882.
Shleifer, A., & Vishny, R. W. (1997). A Survey of Corporate Governance. The Journal of Fincane, 52(2), 737–783.
Tjurins, R., & Nikitins, A. (2011). An empirical study of abnormal return on stock and operating performance as a result of acquisition in banking industry. M.Sc. Thesis in Finance and International Business. Aarhus School ul' Business, Aarhus University. Denmark.
Umobong, A. A. (2017). Related party transactions and firms financial performance. African Research Review, 11(1), 60. https://doi.org/10.4314/afrrev.v11i1.5
Wang, H. Da, Cho, C. C., & Lin, C. J. (2019). Related party transactions, business relatedness, and firm performance. Journal of Business Research, 101, 411–425. https://doi.org/10.1016/j.jbusres.2019.01.066
Wulandari, T. R., Setiawan, D., & Widagdo, A. K. (2022). Related Party Transactions and Firm Value in Indonesia: Opportunistic vs. Efficient Transactions. Risks, 10(11). https://doi.org/10.3390/risks10110210
Anastasia, O. C., & Onuora, J. (2019). Effects of Related Party Transaction on Financial Performance of Companies, Evidenced by Study of Listed Companies in Nigeria. In International Journal of Economics and Financial Management E-ISSN (Vol. 4, Issue 3). www.iiardpub.org
Bansal, S., & Thenmozhi, M. (2020). Does Concentrated Founder Ownership Affect Related Party Transactions? Evidence from an Emerging Economy. Research in International Business and Finance, 53. https://doi.org/10.1016/j.ribaf.2020.101206
Devi, S., Warasniasih, N. M. S., & Masdiantini, P. R. (2020). The Impact of COVID-19 Pandemic on the Financial Performance of Firms on the Indonesia Stock Exchange. Journal of Economics, Business, & Accountancy Ventura, 23(2). https://doi.org/10.14414/jebav.v23i2.2313
Dewan Standar Akuntansi Keuangan. (2015). PSAK No. 7 (revisi 2015): Pengungkapan Pihak-Pihak Berelasi. Jakarta: Ikatan Akuntan Indonesia
Fang, J., Lobo, G. J., Zhang, Y., & Zhao, Y. (2018). Auditing related party transactions: Evidence from audit opinions and restatements. Auditing, 37(2), 73–106. https://doi.org/10.2308/ajpt-51768
Gordon, E., Henry, E., Louwers, T., & Reed, B. (2007). Auditing related party transactions: A literature overview and research synthesis. Accounting Horizons, 21(1), 81–102.
Hendratama, T. D., & Barokah, Z. (2020). Related party transactions and firm value: The moderating role of corporate social responsibility reporting. China Journal of Accounting Research, 13(2), 223–236. https://doi.org/10.1016/j.cjar.2020.04.002
International Accounting Standard Board (IASB). (2023). International Accounting Standard 24 Related Party Disclosure. Retrieved from https://www.ifrs.org/issued-standards/list-of-standards/ias-24-related-party-disclosures/#about
Mustafa, N. H., Latif, R. A., & Taliyang, S. M. (2011). EXPROPRIATION OF MINORITY SHAREHOLDERS’ RIGHTS: EVIDENCE FROM MALAYSIA. In International Journal of Business and Social Science (Vol. 2, Issue 13). www.ijbssnet.com
Jensen, M. C., & Meckling, W. H. (1976). THEORY OF THE FIRM: MANAGERIAL BEHAVIOR, AGENCY COSTS AND OWNERSHIP STRUCTURE. In Journal of Financial Economics (Vol. 3). Q North-Holland Publishing Company.
Kasmir. (2012). Analisis Laporan Keuangan, edisi ketujuh, PT. Raja Grafindo Persada, Jakarta.
Khanna, T., & Palepu, K. (2000). Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups.
Krajewski, M., Frąckowiak, M., Kubacka, M., & Rogowski, Ł. (2021). The bright side of the crisis. The positive aspects of the COVID-19 pandemic according to the Poles. European Societies, 23(S1), S777–S790. https://doi.org/10.1080/14616696.2020.1836387
Lim, B. L., & Yen, S. H. (2011). Agency Problem and Expropriation of Minority Shareholders Malaysian. Malaysian Journal of Economic Studies, 48(1), 37–59.
Okoro, G. E., & Jeroh, E. (2016). Does Related-Party Transactions Affect Financial Performance of Firms in Nigeria? (Evidence from Publicly Quoted Firms). Business Trends, 6(2), 47–53.
Prawoto, N., Priyo Purnomo, E., & Zahra, A. A. (2020). The Impacts of Covid-19 Pandemic on Socio-Economic Mobility in Indonesia. In International Journal of Economics and Business Administration: Vol. VIII (Issue 3).
Rivai, H.V., Basir S., Sudarto, S.S, dan Veithzal, A.P. (2013). Commercial Bank Management: Manajemen Perbankan dari Teori ke Praktik. Jakarta: Raja Grafindo Persada.
Ryngaert, M., Thomas, S. (2012). Not all related party transactions (RPTs) are the same: ex ante versus ex post RPTs. J ournal of Accounting Research 50(3), 845–882.
Shleifer, A., & Vishny, R. W. (1997). A Survey of Corporate Governance. The Journal of Fincane, 52(2), 737–783.
Tjurins, R., & Nikitins, A. (2011). An empirical study of abnormal return on stock and operating performance as a result of acquisition in banking industry. M.Sc. Thesis in Finance and International Business. Aarhus School ul' Business, Aarhus University. Denmark.
Umobong, A. A. (2017). Related party transactions and firms financial performance. African Research Review, 11(1), 60. https://doi.org/10.4314/afrrev.v11i1.5
Wang, H. Da, Cho, C. C., & Lin, C. J. (2019). Related party transactions, business relatedness, and firm performance. Journal of Business Research, 101, 411–425. https://doi.org/10.1016/j.jbusres.2019.01.066
Wulandari, T. R., Setiawan, D., & Widagdo, A. K. (2022). Related Party Transactions and Firm Value in Indonesia: Opportunistic vs. Efficient Transactions. Risks, 10(11). https://doi.org/10.3390/risks10110210