Effect of Related Parties Transactions to the Value of Enterprises Listed on Indonesian Stock Exchange

Abstract

Based on the increasing numbers of accounting scandals, attention to related parties transaction is required. More specifically, the accounting scandals caused by the presence of many related party transactions within the business entity. Related party transactions may cause considerable change in company value and thus will influence various investment decisions. Failure to take this factor into consideration may result in suboptimal decisions. It is then very important to understand how related party transaction affects a company. With reference to this condition; the study was designed with the aim to determine the effect of related party transactions of the value of a business entity that is listed in the Indonesian Stock Exchange during 2010-2012. In more detail, the variable for related party transactions include the total value and the relative scale, while the value of the business entity is viewed from external viewpoint, which is Stock Return. This study uses a quantitative approach to analyze the data. Financial statement data used is the corporate financial statements listed in the Indonesia Stock Exchange from 2009 to 2012 and meet specified characteristics. The study was conducted using multiple linear regression. Independent variable is related party transactions variable, while the dependent variable is the value of a business entity one year after the publication of financial statements. This is done with the assumption that the investor reaction was in the period after the financial statements. The statistical method used is the calculation of descriptive statistics and multiple linear regression test. Descriptive statistics include the mean, standard deviation, maximum value and minimum value of each variable used in this study. Multiple linear regression analysis was conducted to test whether there is any relation between independent variables and the dependent variable. Classical assumption F test, which aims to see whether there is influence between the independent and dependent variables simultaneously, will be performed to the model. F test results will determine whether the model will be tested further. T test, which aims to determine the effect of independent variables on the dependent variable partially or in other words to find out how significant an independent variable can affect the dependent variable.

Keywords: Related Party Transactions, Corporate Value, Financial Statements Reporting.