摘要：Introduction Agency problem distorts reported earnings (Watts and Zimmerman 1986) and eventually leads to the discrepancy between accounting-based financial performance and market performance. One of the transactions that potentially imply high agency problem is related party transactions (RPTs). With the ownership structure dominated by family ownership (Claessens et al. 2000, Habib et al. 2017), Indonesian firms are more susceptible to expropriation by majority shareholders on minority shareholders' interests through RPTs (Friedman et al. 2003). Firms from the same group, especially in Asia and more specifically in Indonesia (Utama et al. 2010), even regularly engage in these transactions (Wong et al. 2015). The Indonesian Stock Exchange corporate action data for the years 2012-2016 demonstrates that RPTs or affiliated transactions are the most frequent transactions engaged by the Indonesian listed firms (mean more than 60 percen relative to the total corporate actions). Studies on the impact of RPTs on firm performance still do not offer conclusive results. According to Gordon et al. (2004) RPTs enables firms to minimize transaction costs with other parties so it is called the efficient transaction hypothesis, or facilitates propping up, i.e., enhancing firm performance (Cheung et al. 2009). Tsai et al. (2015), Utama et al. (2010), and Utama and Utama (2014) empirically support this argument. On the contrary, the adverse effect of RPTs, or the conflict of interest hypothesis, enables majority shareholders to inflict a loss to minority shareholders (Gordon et al. 2004) or to facilitate tunneling, i.e., the expropriation of firm assets for their interests (Cheung et al. 2009). Jian and Wong (2003), Gordon et al. (2004), Cheung et al. (2009), Wahab et al. (2011), and Nekhili and Cherif (2011) demonstrate the tendency of firms engaging in RPTs to expropriate minority shareholders' interests and to manage earnings. However, Pozzoli and Venuti (2014), Magdalena and Dananjaya (2015), and Downs et al. (2016) find that RPTs do not affect firm performance.
