Related Party Transaction and Financial Reporting Quality: An Empirical Analysis of Indonesia Listed Non-Financial Firms
DOI:
https://doi.org/10.30872/miceb.v7i1.15557Keywords:
Financial Reporting Quality, Related Party Transactions, Reputation TheoryAbstract
This study investigates the impact of related party transactions on financial reporting quality in non-financial companies, aiming to validate the reputation theory. This paper employs a quantitative approach using Stata 14 to analyze 354 company observations. The focus of this research is Indonesian non-financial companies, as issuers dominate the IDX capital market. Indonesia is a country characterized by concentrated ownership, which historically has led to expropriation. The focus is on related-party transactions as a limit to expropriation, which can improve the quality of financial reporting. The quality of financial reporting is the goal of issuers using the corporate reputation theory approach, which ultimately benefits minority shareholders. The study finds that related party transactions significantly decrease financial reporting quality. Related party transactions can serve as an effective mechanism for controlling financial reporting quality and strengthening the company’s reputation, thereby improving trust among minority shareholders. This research contributes to the understanding of financial reporting quality in non-financial companies listed on the Indonesian Stock Exchange. The study suggests that controlling related party transactions can help attract minority investors by addressing expropriation in concentrated ownership structures
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