Title: Related party transactions on tunnelling and propping perspective

Authors: Hety Budiyanti; Eduardus Tandelilin; Suad Husnan; Mamduh Hanafi

Addresses: Faculty of Economics, Universitas Negeri Makassar, Indonesia ' Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia ' Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia ' Center of Capital Market Studies, Faculty of Economics and Business, Universitas Gadjah Mada, Indonesia

Abstract: This research investigates the relationship between related party transactions (RPTs) and shareholders value. Using a sample of Indonesian listed firms from 2009 to 2015, we find that considerable shareholder value was destroyed when the RPT is considered as tunnelling activity, while on the other hand firms earn positive significant return when it is considered as propping activity. Our findings also suggest that firms with concentrated ownership structure experience larger value loss. Our further investigations also indicate the abnormal returns are positively related to proxies of corporate governance and information disclosure.

Keywords: related party transaction; tunnelling; propping; market reaction; good corporate governance.

DOI: 10.1504/IJBG.2020.107830

International Journal of Business and Globalisation, 2020 Vol.25 No.1, pp.46 - 72

Received: 07 Sep 2017
Accepted: 23 Dec 2017

Published online: 17 Jun 2020 *

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