Related Party Transactions and Firm Value in Indonesia: Opportunistic vs. Efficient Transactions

Trisninik Ratih Wulandari, Doddy Setiawan () and Ari Kuncara Widagdo
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Trisninik Ratih Wulandari: School of Vocational, Universitas Sebelas Maret, Surakarta 57126, Indonesia
Doddy Setiawan: Faculty of Economics and Business, Universitas Sebelas Maret, Surakarta 57126, Indonesia
Ari Kuncara Widagdo: Faculty of Economics and Business, Universitas Sebelas Maret, Surakarta 57126, Indonesia

Risks, 2022, vol. 10, issue 11, 1-11

Abstract: Related party transactions (RPT) are a common transaction conducted among companies and are the focus of the business world today. The purpose of this study is twofold, as follows: first, to provide empirical evidence for whether the RPT of related party loans in manufacturing companies in Indonesia is an opportunistic transaction or an efficient transaction, and second, to provide evidence for whether there are differences in company perspectives before and during the COVID-19 pandemic. This study employs data from all manufacturing companies listed on the Indonesia Stock Exchange (IDX). The data analysis techniques include descriptive statistical and hypothesis testing. The results of this study in the period 2018–2021 show that RPT has a positive effect on company value. During this period, that is, the years prior to the COVID-19 pandemic, RPT had a negative effect on company value. In contrast, the 2020–2021 period (during the COVID-19 pandemic) shows the opposite result: RPT has a positive effect on company value. The results of this study suggest that in the 2018–2021 and the pandemic period (2020–2021), companies conducted RPT for efficiency purposes, while prior to the pandemic (2018–2019) RPT was conducted for opportunistic purposes.

Keywords: related party transactions; firm value; opportunistic; efficient transaction; COVID-19 (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2022
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