Political Connection, Corporate Governance, and Firm Value: Indonesian Evidence

DOI

10.2991/aebmr.k.210416.006How to use a DOI?

Keywords

Firm Value, Political connection, Corporate governance, Indonesia

Abstract

The article aims to examine the effect of political connections and corporate governance on firm value. Political connections are measured by (1) government share ownership, (2) politically connected president commissioners, and (3) politically connected independent commissioners. Meanwhile, Tobin’s Q represents firm value. Seventeen government-owned firms and 17 private firms listed on the Indonesia Stock Exchange in 2013 to 2017 were used as samples, with a total of 170 firms over five years of observation. Results of Moderated regression analysis indicate that government ownership positively affects firm value in all three models. It indicates that companies whose shares are directly owned by the central government (state-owned companies) are likely to increase company value. Politically connected president commissioners and politically connected independent commissioners are likely to enhance corporate value. Corporate governance practices stand-alone do not influence firm value; however, when the variable interacts with politically related independent commissioners, corporate governance also increases firm value significant at 5 per cent level. Meanwhile, the interaction between corporate governance and the politically connected independent commissioner positively affect corporate value. The result indicates that corporate governance is a pure moderating variable that strengthens the positive association between politically related independent commissioners and firm value. This study provides evidence regarding politically connected independent commissioners’ role in enhancing firm value in a country where corruption is remaining high, and the law enforcement of property right is weak.

Copyright

© 2021, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Siti Rochmah Ika
AU  - Zulkarizki Rachmanti
AU  - Joko P Nugroho
AU  - Wika Harisa Putri
PY  - 2021
DA  - 2021/04/19
TI  - Political Connection, Corporate Governance, and Firm Value: Indonesian Evidence
BT  - Proceedings of the 7th Regional Accounting Conference (KRA 2020)
PB  - Atlantis Press
SP  - 37
EP  - 45
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.210416.006
DO  - 10.2991/aebmr.k.210416.006
ID  - Ika2021
ER  -