The Effect of Institutional Ownership on Disclosure of Related Party Transactions: Empirical Evidence from Indonesian Publicly Listed Companies

摘要

According to the Indonesian Statement of Financial Accounting Standard (PSAK) No. 7, "related parties" are persons or entities with important associations with the reporting entities. Therefore, related parties could significantly influence those entities. This study investigates whether institutional ownership influences transparency in terms of disclosures of related party transactions. This study introduces two types of related parties not having been addressed in previous studies: active and passive. Transparency of related-party disclosure is hypothesized to be associated with institutional ownership. Using listed Indonesian companies for the period 2012-2015, this study tests that hypothesis using a linear regression model Empirical test results show that institutional ownership positively influences disclosures of related party transactions. However, when aggregate ownership is divided into two categories, the results differ. Passive institutional ownership shows no influence on disclosure, whereas active institutional ownership shows positive influence.