The Effects of Family Ownership and Good Corporate Governance on Related Party Transactions

Abstract

This study investigates the impact of family ownership, independent commissioners, and ultimate beneficiary ownership (UBO) disclosure on non-business-related party transactions (RPTs) in Indonesian publicly listed firms. Using a sample of 351 firms from the Indonesian Stock Exchange between 2017 and 2022, we find that family-owned firms engage more extensively in non-business RPTs, suggesting potential expropriation risks. The presence of independent commissioners is found to be not significant in mitigating the non-business RPTs whilst UBO disclosure evidently mitigates such transactions, highlighting the governance role of transparency. Additionally, we explore whether economic crises—proxied by the COVID-19 pandemic—increase non-business RPTs. Our analysis reveals a decrease in significance related to the pandemic on the use of non-business RPTs by family-owned businesses through subsample tests. These findings contribute to the literature on corporate governance and RPTs, particularly in emerging markets with concentrated ownership structures.