Double-Edged Sword of Controlling Shareholders on Politically Connected Group Business

Lela Nurlaela Wati, Momon and Dwi Cahyono

Economic Studies journal, 2023, issue 1, 75-91

Abstract: This study aims to analyze the political connections, controlling shareholders, and financial report quality of affiliated companies in Indonesia. The research sample used 884 observations from group companies, and data analysis was performed using moderating regression analysis with panel data. The result showed that political connection weakens the financial report quality of the companies which are controlled by the family, but the role of independent commissioners can reduce the expropriation carried out by family-controlled toward minority shareholders. State-controlled firms have lower financial report quality than those which are family-controlled at all cut-off levels. The existence of political connections in the state companies weakens the effectiveness of the commissioners as a mechanism for the company’s internal control.

JEL-codes: G32 M21 M41 (search for similar items in EconPapers)
Date: 2023
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