Determination Of Political Connections and Company Size on Financial Performance in Public Companies in Indonesia

Aulia Rachma Wati, Risti Indah Noorhaliza, Stella A.Putri Pitaloka, James Tumewu

Abstract


A political connection is a political involvement in the existence of an enterprise, for example, a relationship between government, officials, and shareholders.  A politically connected company will gain several advantages, including easy access to bank lending financing, tax relief, market power, and acceptance of government contracts. Previous research has shown that political connections can improve corporate performance both in the short and long term. This research aims to demonstrate whether political connections and corporate size affect corporate financial performance. Political connections are projected with the proportion of political-connected Board of Directors and independent commissioners connected to politics and the size of the company as an independent variable, whereas return on equity as a proxy of corporate finance performance as a dependent variable. This research population is a manufacturer company that goes public on the Indonesian Stock Exchange. The samples were obtained using purposive sampling with the observation period 2021-2022. The analytical technique used is linear regression. The results showed that political connectivity variables did not affect financial performance, while corporate size variables had an impact on financial performance

Full Text:

PDF

References


Adhikari, Ajay, Chek Derashis, and Hao Zhang. 2006. “Public Policy, Political Connections, and Effective Tax Rates: Longitudinal Evidence from Malaysia.” Journal of Accounting and Public Policy 25(2006): 574–95.

Agrawal,A.,& Knoeber,C.R. 2001. Do Some Outside Directors Play a Political Role? The Journal of Law and Economics, 44(1),179–198.https://doi.org/10.1086/ 320271

Asquer, R., & Calderoni, F. 2011. Family Matters: Testing the Effect of Political Connections in Italy. Center for The Study of Democracy

Azizah, F., & Amin, M. Al. 2020. Pengaruh Koneksi Politik Terhadap Kinerja Perusahaan (Studi Empiris pada Perusahaan Sektor Pertambangan yang terdaftar di BE tahun 2014-2018). Indonesian Journal of Accounting and Governance, 4(1), 1–17. https://doi.org/10.36766/ijag.v4i1.38

Bourne, P. A. 2010. Modelling Political Trust in a Developing Country. Current Research Journal of Social Science, 2(2), 84–98.

Chen, S., Sun, Z., Tang, S., & Wu, D. (2011). Government Intervention and Investment efficiency: Evidence from China. Journal of Corporate Finance, 17(2), 259–271. https://doi.org/10.1016/j.jcorpfin.2010.08.004

Faccio, M. 2006. Politically–Connected Firms. The American Economic Review,369-386.

Fisman, R. (2001). Estimating the Value of Political Connections. American Economic Review, 91(4), 1095–1102. https://doi.org/10.1257/aer.91.4.1095

Ha, P. V., & Frömmel, M. 2020. Political Connection Heterogeneity and Firm Value in Vietnam. Cogent Business and Management, 7 (1). https://doi.org/10.1080/23311975.2020.1738202

Habibah, N. A, 2018, Pengaruh Koneksi Politik Terhadap Kinerja Pasar dengan Kinerja Keuangan sebagai Variabel Mediasi pada Perusahaan yang Terdaftar di Bursa Efek Indonesia (BEI), Skripsi, STIE Perbanas Surabaya

Johnson, S., & Mitton, T. 2003. Cronyism and Capital Controls: Evidence from Malaysia. Journal of Financial Economics, 67(2), 351–382. https://doi.org/10.1016/S0304-405X(02)00255-6

Khwaja, A. I., & Mian, A. 2005. Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market. The Quarterly Journal of Economics, 120(4), 1371–1411. https://doi.org/10.1162/003355305775097524

Kristanto, A. 2020. Pengaruh Political Connections Terhadap Kinerja Perusahaan. Exero: Journal of Research in Business and Economics, 2(1), 1–21. https://doi.org/10.24071/exero.v2i1.2049

Maulana, A., & Wati, L. N. 2020. Pengaruh Koneksi Politik Dan Struktur Kepemilikan Manajerial Terhadap Nilai Perusahaan. Jurnal Akuntansi, 8(1), 1–12. https://doi.org/10.37932/ja.v8i1.59

Nasih, M., Al-Cholili, A. S. A., Harymawan, I., Haider, I., & Rahayu, N. K. 2020. Political connections, overinvestment and governance mechanism in Indonesia. Cogent Economics and Finance, 8(1). https://doi.org/10.1080/23322039.2020.1790220

Rahmawati, U., Subekti, G. A., Prasaja, M., & Cahyaningdyah, P. 2022. Jurnal Akuntansi Dan Ekonomi Bisnis Vol . 11 No . 2 Oktober. Pengaruh Koneksi Politik Terhadap Kinerja Keuangan Pada Perusahaan Manufaktur di Indonesia Oleh : 11(2), 46–54.

Sucipto. 2003. “Penilaian Kinerja Keuangan.” Jurnal Akuntansi. Universitas Sumatra Utara. Medan.

Suprihanto, Dodi, 2011, Pengusaha dan Politik: Keterlibatan Pengusaha Dalam Dunia Politik Di Sumatera Barat 1999 – 2009, Sumatra Barat: Universitas Andalas, diakses dari http://repository.unand.ac.id/17469/

Sutopo, B., Trinugroho, I., dan Damayanti,S,M., 2017. "Politically Connected Banks: Some Indonesian", International Journal of Business and Society 18(1), pp. 83–94.asquer

Wijantini, 2007, A Test Of The Relationship Between Political Connection And Indirect Costs Of Financial Distress In Indonesia, Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Vol.3. No. 2, 6, 81, 2007

Wu, W., Wu, C., Zhou, C., & Wu, J. (2012). Political connections, tax benefits, and firm perfomance. Journal of Accounting and Public Policy,31 (3), 277–300.

Wulandari, Ndarunningpuri, 2006, Pengaruh Indikator Mekanisme Corporate Governance Terhadap Kinerja Perusahaan Publik Di Indonesia, Fokus Ekonomi Vol. 1 No. 2 Desember: 120-136


Refbacks

  • There are currently no refbacks.


____________________________________________________________________________________

Departement of Management ECONOMY AND BUSINESS FACULTY - UNIVERSITAS TRUNOJOYO MADURA

Jl. Raya Telang PO BOX 2 Kamal - Bangkalan, 69162 - Jawa Timur