The Role of Independent Commissioners and Audit Committee in Moderating the Influence of Related Party Transactions on Firm Value

Abstract

This research aims to investigate the impact of related party transactions on firm value moderated by the Independent Commissioner and the Audit Committee. The sample used in this research is companies in the manufacturing sector that were listed on Indonesia Stock Exchange in period 2017-2019. Purposive sampling method was used to produce a sample of 167 firm-years. By using multiple regression analysis, this study found related party transactions in assets and liabilities have a positive effect on firm value, while related party transactions on sales and expenses have no effect on firm value. This study also finds that the Independent Commissioner weakens the positive effect of related party transactions on assets and liabilities on firm value, while the Audit Committee strengthens the positive effect of related party transactions on assets and liabilities on firm value. The results of this study suggest that the efficient transaction hypothesis is supported. Affiliated companies in one business group can use resources together, so that they can benefit from economies of scale and economies of scope, transactions like this are included in the efficient category because they benefit shareholders as a whole. This study also shows the role of the Audit Committee in encouraging companies to conduct efficient related party transactions.