Negative Entrenchment Effect of Business Group Conglomerates on Selling and Purchasing Related Party Transactions

Dayinta Ayuningtyas (Universitas Indonesia)
Vera Diyanty (Universitas Indonesia)

Journal of Economics, Business, & Accountancy Ventura
Vol 19, No 3 (2016): December 2016 - March 2017

This study aims to explain the negative entrenchment effect arised from selling and purchasing related party transactions on business group conglomerates. This study is using 322 firm-year data of firms listed at Indonesia Stock Exchange in 2012-2013 period.This research provides evidence that the ownership by business conglomerates strengthened the negative entrenchment effect in both total of selling-purchasing related party transactions and selling-purchasing related party transactions which come from operating activities. Thus, from the result, it can be presumed that there might be a possibility of agency conflict arised from selling-purchasing related party transactions when a firm is part of business conglomerates.