DOES RELATED-PARTY TRANSACTIONS DISCLOSURE AFFECT THE VALUE RELEVANCE OF FINANCIAL STATEMENTS?

Diah Agustina Prihastiwi, Agustina Prativi Nugraheni, Octavia Lhaksmi Pramudyastuti

Abstract


Research Purpose. This study aims to provide support regarding the value relevance of the additional disclosure of RPTs and its predictive value. 

Research Method. The sample of this research is 343 public companies listed on the Indonesian Stock Exchange from 2016 to 2020. We analyze the effect of RPTs disclosure on the value relevance of financial statement information and its ability to predict abnormal returns using regression analysis between RPTs sales, non-RPTs sales, and total costs with abnormal returns.

Research Results and Findings. The analysis results show that the disclosure of RPTs provides incremental information to the users of the financial statement. Furthermore, the disclosure of RPTs also has a significant positive relationship with abnormal returns. These findings show that the provision of information beyond standard requirements is beneficial to financial statement users.

Save to Mendeley


Keywords


Related-Party Transactions; Abnormal Returns; Value Relevance; Voluntary Disclosure; Corporate Governance

Full Text:

PDF

References


Abigail, A., & Dharmastuti, C. (2022). The Impact of Related Party Transactions on Firm Value in Indonesia: Moderating Role of Good Corporate Governance. Cogent Business & Management, 9(1), 1-23. https://doi.org/10.1080/23311975.2022.2135208.

Aharony, J., Wang, J., & Yuan, H. (2010). Tunneling as an Incentive for Earnings Management During the IPO Process in China. Journal of Accounting and Public Policy, 29(1), 1–26. https://doi.org/10.1016/j.jaccpubpol.2009.10.003.

Andreou, C. K., Andreou, P. C., & Lambertides, N. (2021). Financial Distress Risk and Stock Price Crashes. Journal of Corporate Finance, 67, 1-29. https://doi.org/10.1016/j.jcorpfin.2020.101870

Anggala, A., & Basana, S. R. (2020). Pengaruh Related Party Transaction Terhadap Nilai Perus-ahaan. International Journal of Financial and Investment Studies (IJFIS), 1(1), 42–52. https://doi.org/10.9744/ijfis.1.1.42-52.

Ariff, A. M., & Hashim, H. A. (2013). The Breadth and Depth of Related Party Transactions Disclosures. International Journal of Trade, Econom-ics and Finance, 4(6), 388–392. https://doi.org/0.7763/IJTEF.2013.V4.323.

Bae, S. C., & Kwon, T. H. (2021). Do Firms Benefit From Related Party Transactions With For-eign Affiliates? Evidence from Korea. Interna-tional Review of Finance, 21(3), 945–965. https://doi.org/10.1111/irfi.12308.

Cheung, Y.-L., Rau, P. R., Stouraitis, A., & Tan, W. (2021). Does the Market Understand the Ex Ante Risk of Expropriation by Controlling Shareholders? Journal of Corporate Finance, 68, 1-22. https://doi.org/10.1016/j.jcorpfin.2021.101 946.

Cho, S., & Lim, K.-M. (2018). Tunneling by Related-party Transactions: Evidence from Korean Conglomerates. Asian Economic Journal, 32(2), 147–164. https://doi.org/10.1111/asej.12146.

Diab, A. A., Aboud, A., & Hamdy, A. (2019). The Impact of Related Party Transactions on Firm Value: Evidence From a Developing Country. Journal of Financial Reporting and Accounting, 17(3), 571–588. https://doi.org/10.1108/JFRA-08-2018-0064.

Elbakry, A. E., Nwachukwu, J. C., Abdou, H. A., & Elshandidy, T. (2017). Comparative Evidence on the Value Relevance of IFRS-Based Ac-counting Information in Germany and the UK. Journal of International Accounting, Audit-ing and Taxation, 28, 10–30. https://doi.org/10.1016/j.intaccaudtax.2016.12.002.

Elshandidy, T., & Zeng, C. (2022). The Value Relevance of Risk-Related Disclosure: Does The Tone of Disclosure Matter? Borsa Istanbul Re-view, 22(3), 498–514. https://doi.org/10.1016/j.bir.2021.06.014.

Fang, J., Lobo, G. J., Zhang, Y., & Zhao, Y. (2018). Auditing Related Party Transactions: Evi-dence from Audit Opinions and Restatements. Auditing: A Journal of Practice & Theory, 37(2), 73–106. https://doi.org/10.2308/ajpt-51768.

Habib, A., Jiang, H., & Zhou, D. (2015). Related-Party Transactions and Audit Fees: Evidence from China. Journal of International Accounting Research, 14(1), 59–83. https://doi.org/10.2308/jiar-51020.

Habib, A., Muhammadi, A. H., & Jiang, H. (2017). Political Connections and Related Party Transactions: Evidence from Indonesia. The International Journal of Accounting, 52(1), 45–63. https://doi.org/10.1016/j.intacc.2017.01.004.

Haß, L. H., Johan, S., & Müller, M. A. (2016). The Effectiveness of Public Enforcement: Evidence from the Resolution of Tunneling in China. Journal of Business Ethics, 134(4), 649–668. https://doi.org/10.1007/s10551-014-2389-z

Hawn, O., Chatterji, A. K., & Mitchell, W. (2018). Do Investors Actually Value Sustainability? New Evidence from Investor Reactions to the Dow Jones Sustainability Index (DJSI). Strategic Management Journal, 39(4), 949–976. https://doi.org/10.1002/smj.2752.

Hendratama, T. D., & Barokah, Z. (2020). Related Party Transactions and Firm Value: The Moderating Role of Corporate Social Responsibility Reporting. China Journal of Accounting Re-search, 13(2), 223–236. https://doi.org/10.1016/j.cjar.2020.04.002.

Huang, W. (2016). Tunneling Through Related-Party Loan Guarantees: Evidence from a Quasi-Experiment in China. Review of Quantitative Finance and Accounting, 47, 857–884. https://doi.org/10.1007/s11156-015-0523-3.

Hwang, N.-C. R., Chiou, J.-R., & Wang, Y.-C. (2013). Effect of Disclosure Regulation on Earnings Management Through Related-Party Transactions: Evidence from Taiwanese Firms Operating in China. Journal of Accounting and Public Policy, 32(4), 292–313. https://doi.org/10.1016/j.jaccpubpol.2013. 04.003.

Ikatan Akuntan Indonesia. (2015). PSAK 7: Pengungkapan Pihak-pihak Berelasi. Standar Akuntansi Keuangan. Retrieved from: http://www.iaiglobal.or.id/v03/standar-akuntansi-keuangan/pernyataan-sak-12-psak-7-pengungkapan-pihakpihak-berelasi. November 18, 2022, at 10.08 WIB.

Jatiningrum, C., Fauzi, F., Utami, B. H., & Kassim, A. A. M. (2023). Mitigate Type II Agency Conflict Through Good Corporate Governance and Disclosure Quality. Akuntanbilitas, 17(1), 1–16. https://doi.org/10.29259/ja.v17i1.19695.

Jensen, M. C., & Meckling, W. H. (2019). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Tricker, R. I. (Ed.) Corporate Governance (pp. 77–132). London: Gower.

Kohlbeck, M., & Mayhew, B. W. (2017). Are Related Party Transactions Red Flags? Contemporary Accounting Research, 34(2), 900–928. https://doi.org/10.1111/1911-3846.12296.

Law of the Republic of Indonesia Number 36 of 2008. (2008). Perubahan Keempat Atas Undang-Undang Nomor 7 Tahun 1983 tentang Pajak Penghasilan. Retrieved from https://peraturan.bpk.go.id/Home/Details/39704/uu-no-36-tahun-2008.

Lo, A. W. Y., & Wong, R. M. K. (2016). Silence is Golden? Evidence from Disclosing Related-Party Transactions in China. Journal of Ac-counting and Public Policy, 35(5), 540–564. https://doi.org/10.1016/j.jaccpubpol.2016 .06.002.

Maigoshi, Z. S., Latif, R. A., & Kamardin, H. (2016). Earnings Management: A Case of Related Par-ty Transactions. International Journal of Eco-nomics and Financial Issues, 6(7S), 51-55.

Organisation for Economic Co-operation and Development. (2012). Related Party Transactions and Minority Shareholder Rights. Retrieved from https://www.oecd.org/corporate/ca/corporategovernanceprinci-ples/relatedpartytransactionsandminorityshareholderrights.htm.

Pratama, A. (2018a). Do Related Party Transactions and Tax Avoidance Affect Firm Value? Review of Integrative Business and Economics Research, 7(1), 106–116.

Pratama, A. (2018b). Does Corporate Governance Affect Related-Party Transactions? A Study on Indonesian Companies Listed on The In-donesian Stock Exchange in 2011-2015. Inter-national Journal of Economic Policy in Emerging Economies, 11(5), 470–478.

Rahman, A. F., & Nugrahanti, Y. W. (2021). The Influence of Related Party Transaction and Corporate Governance on Firm Value: An Empirical Study in Indonesia. The Journal of Asian Finance, Economics and Business, 8(6), 223–233.

Regulation of Financial Services Authority No. 42/PJOK.04/2020. (2020). Transaksi Afiliasi dan Transaksi Benturan Kepentingan. Retrieved from https://ojk.go.id/id/regulasi/Pages/Transaksi-Afiliasi-dan-Transaksi-Benturan-Kepentingan.aspx.

Rieg, R., & Vanini, U. (2023). Value Relevance of Voluntary Intellectual Capital Disclosure: A Meta-Analysis. Review of Managerial Science, 17, 2587-2631. https://doi.org/10.1007/ s11846-023-00630-3.

Shan, Y. G. (2015). Value Relevance, Earnings Management and Corporate Governance in China. Emerging Markets Review, 23, 186–207. https://doi.org/10.1016/j.ememar.2015.04.009.

Shan, Y. G. (2019). Do Corporate Governance and Disclosure Tone Drive Voluntary Disclosure of Related-Party Transactions in China? Journal of International Accounting, Auditing and Taxation, 34, 30–48. https://doi.org/10.1016/j.intaccaudtax. 2019.02.002.

Strong, N. (1992). Modelling Abnormal Returns: A Review Article. Journal of Business Finance & Accounting, 19(4), 533–553. https://doi.org/10.1111/j.1468-5957.1992. tb00643.x.

Sumiyana, S., & Setyowati, S. M. (2021). Family Ownership’s Predisposition to the Related Party Transaction and Its Influence on a Stock Price Crash: Evidence from Indonesia. The Journal of Asian Finance, Economics and Business, 8(8), 103–115. https://doi.org/10.13106/jafeb.2021.vol8.no8.0103.

Tambunan, M. E., Siregar, H., Manurung, A. H., & Priyarsono, D. S. (2017). Related Party Transactions and Firm Value in the Business Groups in the Indonesia Stock Exchange. Journal of Applied Finance and Banking, 7(3), 1-20.

Utama, C. A., & Utama, S. (2014). Corporate Governance, Size and Disclosure of Related Party Transactions, and Firm Value: Indonesia Evi-dence. International Journal of Disclosure and Governance, 11(4), 341–365.

Wang, F., Mbanyele, W., & Muchenje, L. (2022). Economic Policy Uncertainty and Stock Li-quidity: The Mitigating Effect of Information Disclosure. Research in International Business and Finance, 59, 1-59. https://doi.org/10.1016/j.ribaf.2021.101553.




DOI: https://doi.org/10.33508/jako.v15i3.4530