Controlling shareholders, audit committee characteristics, and related party transaction disclosure: Evidence from Indonesia

Dwi Ernawati, Y. Anni Aryani

Abstract


The disclosure of related party transactions was required in the financial statements because it is potentially misused by controlling shareholders. This study aims to examine controlling shareholders, audit committee characteristics, and related party transaction disclosure. The controlling shareholders are proxied by the family share ownership and the proportion of the controlling shareholder family members on the board of directors. The samples used in this study are family companies listed on the Indonesia Stock Exchange (IDX) in the year 2017. In this study, the multiple regressions were used to test the hypothesis. We found that controlling shareholders have a negative influence on related party transaction disclosure. Meanwhile, accounting expertise of the audit committee has a positive influence on related party transaction disclosure. Our result show companies that controlled by the family have low motivation to disclose related party transaction disclosure. However, accounting expertise audit committee may encourage companies to disclose related party transactions.

JEL Classifications: G32, G34

DOI: https://doi.org/10.26905/jkdp.v23i1.2701

 


Keywords


Audit Committee; Controlling Shareholders; Family Control; Related Party Transaction Disclosure

Full Text:

PDF

References


Abdullah, M., Evans, L., Fraser, I., & Tsalavoutas, I. (2015). IFRS mandatory disclosures in Malaysia: The influence of family control and the value (ir) relevance of compliance levels. Accounting Forum, 39(4), 328–348. https://doi.org/10.1016/j.accfor.2015.05.003

Aldamen, H., Duncan, K., Kelly, S., McNamara, R., & Nagel, S. (2011). Audit committee characteristics and firm performance during the global financial crisis. Accounting and Finance, 52(4), 971-1000. https://doi.org/doi: 10.1111/j.1467-629X.2011.00447.x

Ali, A., Chen, T., & Radhakrishnan, S. (2007). Corporate disclosures by family firms. Journal of Accounting and Economics, 44, 238–286. https://doi.org/10.1016/j.jacceco.2007.01.006

Arifah, D. A. (2012). Pengaruh mekanisme corporate governance terhadap pengungkapan intellectual capital pada Perusahaan Ic Intensive. Jurnal Akuntansi dan Keuangan Indonesia, 9(2), 189–210.

Badan Pengawas Pasar Modal dan Lembaga Keuangan. (2011). Keputusan Ketua Badan Pengawas Pasar Modal dan Lembaga Keuangan Nomor: KEP-264/BL/2011 Tentang Pengambilalihan Perusahaan Terbuka.

Badan Pengawas Pasar Modal dan Lembaga Keuangan. (2012). Keputusan Ketua Badan Pengawas Pasar Modal dan Lembaga Keuangan Nomor: Kep-347/Bl/2012. Tentang Penyajian dan Pengungkapan Laporan Keuangan Emiten atau Perusahaan Publik.

Beasley, M. S., Carolina, N., Hermanson, D. R., & Neal, T. L. (2009). The audit committee oversight process. Contemporary Accounting Research, 26(1), 65–122. https://doi.org/10.1506/car.26.1.3

Bepari, M. K., Rahman, S. F., & Mollik, A. T. (2014). Firms’ compliance with the disclosure requirements of IFRS for goodwill impairment testing: Effect of the global financial crisis and other firm characteristics. Journal of Accounting & Organizational Change, 10(1), 116–149. https://doi.org/DOI 10.1108/JAOC-02-2011-0008

Carlo, E. Di. (2014). Related party transactions and separation between control and direction in business groups: The Italian case. Corporate Governance, 14(1), 58–85. https://doi.org/10.1108/CG-02-2012-0005

Carney, R. W., & Hamilton-Hart, N. (2015). Bulletin of Indonesian economic studies what do changes in corporate ownership in Indonesia tell us ? 37–41. https://doi.org/10.1080/00074918.2015.1016570

Darmadi, S., & Sodikin, A. (2013). Information disclosure by family-controlled firms: The role of board independence and institutional ownership. Asian Review of Accounting, 21(3), 223–240. https://doi.org/10.1108/ARA-01-2013-0009

Dyanty, V., Utama, S., Rossieta, H., & Veronica, S. (2012). Pengaruh kepemilikan pengendali akhir terhadap transaksi pihak berelasi. Simposisum Nasional Akuntansi XV Banjarmasin.

El-helaly, M., & Lowe, A. D. (2018). The interplay between related party transactions and earnings management: The role of audit quality. Journal of International Accounting, 32, 47–60. https://doi.org/10.1016/j.intaccaudtax.2018.07.003

Elkelish, W. W. (2017). IFRS related party transactions disclosure and firm valuation in the United Arab Emirates emerging market. Journal of Accounting in Emerging Economies, 7(2), 173–189. https://doi.org/DOI 10.1108/JAEE-05-2015-0035

Ernst & Young. (2014). International GAAP ® Disclosure Checklist.

Faccio, M., & Lang, L. H. P. (2002). The ultimate ownership of Western European. Journal of Financial Economics, 65(3), 365–395. https://doi.org/https://doi.org/10.1016/S0304-405X(02)00146-0

Fatmawati, R., Astuti, D. W., & Suhardjanto, D. (2018). Peran corporate governance dalam meningkatkan voluntary disclosure. Jurnal Akuntansi Multiparadigma, 9(1), 57–69.

Ge, W., Drury, D. H., Fortin, S., Liu, F., & Tsang, D. (2010). Value relevance of disclosed related party transactions. Advances in Accounting, 26(1), 134–141. https://doi.org/10.1016/j.adiac.2010.02.004

Glaum, M., Schmidt, P., & Street, D. L. (2013). Accounting and business research compliance with IFRS 3- and IAS 36-required disclosures across 17 European countries: Company- and country -level determinants. Accounting and Business Research, 43(3), 37–41. https://doi.org/10.1080/00014788.2012.711131

Gordon, E. A., Henry, E., & Palia, D. (2004). Related Party transactions and corporate governance. Advances in Financial Economics, 9, 1–27. https://doi.org/10.1016/S1569-3732(04)09001-2

Haji, A. A. (2015). The role of audit committee attributes in intellectual capital disclosures: Evidence from Malaysia. Managerial Auditing Journal, 30(8/9), 756–784. https://doi.org/10.1108/MAJ-07-2015-1221

Haldar, A., & Raithatha, M. (2017). Do compositions of board and audit committee improve financial disclosures ? International Journal of Organizational Analysis, 25(2), 251–269. https://doi.org/10.1108/IJOA-05-2016-1030

Hodgdon, C., & Hughes, S. B. (2016). The effect of corporate governance, auditor choice, and global activities on EU company disclosures of estimates and judgments. Journal of International Accounting, Auditing, and Taxation, 26, 28–46. https://doi.org/10.1016/j.intaccaudtax.2016.02.002

House, M., & Cooke, T. E. (1992). The impact of size, stock market listing, and industry type on disclosure in the annual reports of Japanese listed corporations. Accounting and Business Research, 22(87), 229–237. https://doi.org/10.1080/00014788.1992.9729440

Ikatan Akuntan Indonesia (IAI). (2015). Pernyataan Standar Akuntansi Keuangan Revisi 2015. Dewan Standar Akuntansi Keuangan.

Inaam, Z., & Khamoussi, H. (2016). Audit committee effectiveness, audit quality, and earnings management: A meta-analysis. International Journal of Law and Management, 58(2), 179–196. https://doi.org/10.1108/IJLMA-01-2015-0006

Jankensgård, H. (2018). International review of financial analysis between a rock and a hard place: New evidence on the relationship between ownership and voluntary disclosure. International Review of Financial Analysis, 56(C), 281–291. https://doi.org/10.1016/j.irfa.2017.09.009

Jian, M., & Wong, T. J. (2010). Propping through related party transactions. Review of Accounting Studies, 15(1), 70–105. https://doi.org/10.1007/s11142-008-9081-4

Kang, M., Lee, H., Lee, M., & Chool, J. (2014). The association between related-party transactions and control – ownership wedge: Evidence from Korea. Pacific-Basin Finance Journal, 29, 272–296. https://doi.org/10.1016/j.pacfin.2014.04.006

Kent, P., & Stewart, J. (2008). Corporate governance and disclosures on the transition to international financial reporting standards. Accounting and Finance, 48(4), 649–671. https://doi.org/doi: 10.1111/j.1467-629x.2007.00257.x

Kharis, A., & Suhardjanto, D. (2012). Corporate governance dan ketaatan pengungkapan wajib pada Badan Usaha Milik Negara. Jurnal Keuangan dan Perbankan, 16(1), 37–44.

Kohlbeck, M., & Mayhew, B. W. (2010). Valuation of firm that discloses related party transaction. Journal of Accounting and Public Policy, 29(2), 115–137. https://doi.org/10.1016/j.jaccpubpol.2009.10.006

Krisna, A. D., & Suhardianto, N. (2016). Faktor-faktor yang mempengaruhi pengungkapan tanggung jawab sosial. Jurnal Akuntansi dan Keuangan, 18(2), 119–127. https://doi.org/10.9744/jak.18.2.119-128

Kusnadi, Y., Leong, K. S., Suwardy, T., & & Wang, J. (2015). Audit committees and financial reporting quality in Singapore. Journal of Business Ethics, 139(1), 197-214. https://doi.org/10.1007/s10551-015-2679-0

Laporta, R., Silanes, L.-F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1–2), 3–27. https://doi.org/https://doi.org/10.1016/S0304-405X(00)00065-9

Li, J., Mangena, M., & Pike, R. (2012). The effect of audit committee characteristics on intellectual capital disclosure. The British Accounting Review, 44(2), 98–110. https://doi.org/10.1016/j.bar.2012.03.003

Lin, Y. (2018). The consequences of audit committee quality. Managerial Auditing Journal, 33(2), 192–216. https://doi.org/10.1108/MAJ-03-2016-1350

Maigoshi, Z. S., Latif, R. A., & Kamardin, H. (2018). Research in international business and finance change in value-relevance of disclosed RPT across accounting regimes: Evidence from Malaysia. Research in International Business and Finance, 44(C), 422–433. https://doi.org/10.1016/j.ribaf.2017.07.114

Mangena, M., & Pike, R. (2005). The effect of audit committee shareholding, financial expertise, and size on interim financial disclosures. Accounting and Business Research, 35(4), 327–349. https://doi.org/10.1080/00014788.2005.9729998

Menon, K., & Williams, J. D. (1994). The use of audit committees for monitoring. Journal of Accounting and Public Policy, 13(2), 121–139. https://doi.org/https://doi.org/10.1016/0278-4254(94)90016-7

Mensah, B. K. A. (2018). The effect of audit committee effectiveness and audit quality on corporate voluntary disclosure quality. African Journal of Economic and Management Studies. https://doi.org/10.1108/AJEMS-04-2018-0102

Nekhili, M., & Cherif, M. (2011). Related parties transactions and firm’s market value: The French case. Review of Accounting and Finance, 10(3), 291–315. https://doi.org/10.1108/14757701111155806

Nussy, T. M. (2013). Corporate governance dan etnisitas terhadap pengungkapan corporate social responsibility. Jurnal Keuangan dan Perbankan, 17(1), 1–10.

Othman, R., Farhana, I., Maznah, S., Arif, M., & Abdul, N. (2014). Influence of audit committee characteristics on voluntary ethics disclosure. Procedia - Social and Behavioral Sciences, 145, 330–342. https://doi.org/10.1016/j.sbspro.2014.06.042

Otoritas Jasa Keuangan. (2015). Peraturan Otoritas Jasa Keuangan No 55 /POJK.04/2015 Tentang Pembentukan dan Pedoman Pelaksanaan Kerja Komite Audit.

Premuroso, R. F., & Bhattacharya, S. (2008). Do early and voluntary filers of financial information in XBRL format signal superior corporate governance and operating performance ? International Journal of Accounting Information Systems, 9(1), 1–20. https://doi.org/10.1016/j.accinf.2008.01.002

Renders, A., & Gaeremynck, A. (2012). Corporate governance, principal-principal agency conflicts, and firm value in European listed companies. Corporate Governance: An International Review, 20(2), 125–143. https://doi.org/10.1111/j.1467-8683.2011.00900.x

Salehi, M., & Shirazi, M. (2016). Audit committee impact on the quality of financial reporting and disclosure. Management Research Review, 39(12), 1639–1662. https://doi.org/10.1108/MRR-09-2015-0198

Sellami, Y. M., & Fendri, H. B. (2017). The effect of audit committee characteristics on compliance with IFRS for related party disclosures: Evidence from South Africa. Managerial Auditing Journal, 32(6), 603–626. https://doi.org/DOI 10.1108/MAJ-06-2016-1395

Setiaatmaja, L., Tanewski, G. A., & Skully, M. (2009). The role of dividends, debt, and board structure in the governance of family-controlled firms. Journal of Business Finance & Accounting, 36(7-8), 863–898. https://doi.org/10.1111/j.1468-5957.2009.02151.x

Setiawan, D., Bandi, B., Phua, L. K., & Trinugroho, I. (2016). Ownership structure and dividend policy in Indonesia. Journal of Asia Business Studies, 10(3), 230–252. https://doi.org/10.1108/JABS-05-2015-0053

Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737–783. https://doi.org/https://doi.org/10.1111/j.1540-6261.1997.tb04820.x

Suhardjanto, D., & Dewi, A. (2011). Pengungkapan risiko finansial dan tata kelola perusahaan: Studi empiris perbankan Indonesia. Jurnal Keuangan dan Perbankan, 15(1), 105–118.

Tsalavoutas, I. (2011). Transition to IFRS and compliance with mandatory disclosure requirements : What is the signal ? Advances in Accounting, Incorporating Advances in International Accounting, 27(2), 390–405. https://doi.org/10.1016/j.adiac.2011.08.006

Tsalavoutas, I., & Dionysiou, D. (2014). Value relevance of IFRS mandatory disclosure requirements. Journal of Applied Accounting Research, 15(1), 22–42. https://doi.org/10.1108/JAAR-03-2013-0021

Utama, C. A., Utama, S., & Amarullah, F. (2017). Corporate governance and ownership structure: Indonesia evidence. Corporate Governance, 17(2), 166–191. https://doi.org/10.1108/CG-12-2015-0171

Utama, C., & Utama, S. (2014). Determinants of disclosure level of related party transactions in Indonesia. International Journal of Disclosure and Governance, 11(1), 74–98. https://doi.org/10.1057/jdg.2012.15

Villalonga, B., & Amit, R. (2006). How do family ownership, control, and management affect firm value? Journal of Financial Economics, 80(2), 385- 417.

Wardhani, R. (2015). Risiko ekspropriasi oleh pemilik pengendali dan tata kelola perusahaan terhadap tingkat penggunaan utang bank. Jurnal Keuangan dan Perbankan, 19(2), 200–212.

Wijaya, R. E. (2009). Keberadaan corporate governance dan kondisi financial distressed terhadap voluntary disclosure. Jurnal Keuangan dan Perbankan, 13(3), 395–404.

Yasser, Q. R., & Al Mamun, A. (2015). Effects of ownership concentration on firm performance: Pakistani evidence. Journal of Asia Business Studies, 9(2), 162–176. https://doi.org/10.1108/JABS-07-2014-0047

Yeh, Y., Lee, T. -S., & Woidtke, T. (2001). Family control and corporate governance: Evidence from Taiwan. International Review of Finance, 2(1/2), 21–48. https://doi.org/https://doi.org/10.1111/1468-2443.00014

Zulkarnaen, E. I., & Mahmud, A. (2013). Pengaruh good corporate governance terhadap luas pengungkapan intellectual capital. Jurnal Dinamika Akuntansi, 5(1), 79–85.




DOI: https://doi.org/10.26905/jkdp.v23i1.2701

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: -
Email: [email protected]

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0