Tunneling Control and Good Corporate Governance to Improve State-Owned Enterprises Performance
DOI:
https://doi.org/10.26740/jaj.v14n2.p191-202Keywords:
Corporate Governance, Performance, State-Owned Enterprise, TunnelingAbstract
This research aims to look at the influence of tunneling and GCG variables on the performance of Indonesian State-Owned Enterprises. The data used is secondary data taken from the Annual Report of Indonesian State-Owned Enterprises. The data period is six years, from 2014 to 2019. The population in this study was 44 Indonesian State-Owned Enterprises, and the sample was determined using purposive sampling methods. The data is processed using multiple linear regression analysis. The results of the data analysis showed that tunneling and GCG had a significant effect on the performance of Indonesian State-Owned Enterprises, both simultaneously and partially. This study implies that more technical regulations are needed to regulate the boundaries of related transactions in State-Owned Enterprises so that tunneling actions can be minimized. State-Owned Enterprises must also always improve their performance to be more optimal, at least it can increase of State Owned Enterprises that can deposit dividends into the state treasury. The novelty of this research is the use of SOE objects for tunneling subjects that are generally research in private companies.
References
Agnihotri, A., & Bhattacharya, S. (2019). Internationalization, related party transactions, and firm ownership structure: Empirical evidence from an emerging market. Research in International Business and Finance, 48, 340–352.
Bae, K., Kang, J., & Kim, J. (2002). Tunneling or value added? Evidence from mergers by Korean business groups. The Journal of Finance, 57(6), 2695–2740.
Bai, J., & Lian, L. (2013). Why do state-owned enterprises over-invest? Government intervention or managerial entrenchment. China Journal of Accounting Studies, 1(3–4), 236–259.
Balbuena, S. S. (2014). State-owned Enterprises in Southern Africa: A Stocktaking of Reforms and Challenges (No. 13; Issue 13).
Bansal, S., & Thenmozhi, M. (2020). Does concentrated founder ownership affect related party transactions? Evidence from an emerging economy. Research in International Business and Finance, 1–36. https://doi.org/10.1016/j.ribaf.2020.101206
Bertrand, M., Mehta, P., & Mullainathan, S. (2002). Ferreting out tunneling: An application to Indian business groups. The Quarterly Journal of Economics, 117(1), 121–148.
Boko, F., & Qin, Y. J. (2011). Failure of state-owned enterprises in Benin. International Conference on Management and Service Science, MASS 2011. https://doi.org/10.1109/ICMSS.2011.5998620
Chen, C., Wan, W. Y., & Zhang, W. (2018). Board Independence as a Panacea to Tunneling? An Empirical Study of Related-Party Transactions in Hong Kong and Singapore. In Journal of Empirical Legal Studies (Vol. 15, Issue 4). https://doi.org/10.1111/jels.12197
Chen, Y., & Chien, C.-Y. (2007). Monitoring Mechanism , Corporate Governance and Related Party Transactions. 1–25.
Cheung, Y.-L., Jing, L., Lu, T., Rau, P. R., & Stouraitis, A. (2009). Tunneling and propping up: An analysis of related party transactions by Chinese listed companies. Pacific-Basin Finance Journal, 17(3), 372–393.
Cheung, Y. L., Rau, P. R., & Stouraitis, A. (2006). Tunneling, propping, and expropriation: evidence from connected party transactions in Hong Kong. Journal of Financial Economics, 82(2), 343–386. https://doi.org/10.1016/j.jfineco.2004.08.012
Cho, S., & Lim, K. M. (2018). Tunneling by Related-party Transactions: Evidence from Korean Conglomerates. Asian Economic Journal, 32(2), 147–164. https://doi.org/10.1111/asej.12146
Christensen, T., & Lægreid, P. (2020). Balancing Governance Capacity and Legitimacy: How the Norwegian Government Handled the COVID-19 Crisis as a High Performer. Public Administration Review, 80(5), 774–779. https://doi.org/10.1111/puar.13241
Christiansen, H. (2013). Balancing Commercial and Non-Commercial Priorities of State-Owned Enterprises Hans. In OECD Corporate Governance Working Papers No. 6.
Danielson, M. G., Heck, J. L., & Shaffer, D. R. (2008). Shareholder Theory – How Opponents and Proponents Both Get It Wrong. Journal of Applied Finance, 1–5.
Eng, L. L., Fang, H., Tian, X., Yu, T. R., & Zhang, H. (2019). Financial crisis and real earnings management in family firms: A comparison between China and the United States. Journal of International Financial Markets, Institutions and Money, 59, 184–201. https://doi.org/https://doi.org/10.1016/j.intfin.2018.12.008
Enriques, L. (2014). Related Party Transactions : Policy Options and Real-World Challenges (With a Critique of the European Commission Proposal) (No. 267; Issue October).
Fama, E. F., & Jensen, M. C. (1983). Agency Problems and Residual Claims. The Journal of Law and Economics, 26(2), 327–349. https://doi.org/10.1086/467038
Friedman, E., Johnson, S., & Mitton, T. (2003). Propping and tunneling. Journal of Comparative Economics, 31(4), 732–750.
Gao, L., & Kling, G. (2008). Corporate governance and tunneling: Empirical evidence from China. Pacific-Basin Finance Journal, 16(5), 591–605.
Gordon, E. A., & Henry, E. (2011). Related Party Transactions and Earnings Management. SSRN Electronic Journal, 1–26. https://doi.org/10.2139/ssrn.612234
Jensen, M. C., & Meckling, W. H. (1976). Theory of The Firm: Managerial Behavior, Agency Cost, and Ownership Structure. Journal of Financial Economics, 3, 305–360.
Johnson, S., La Porta, R., Lopez, F., & Shleifer, A. (2000). Tunneling. The Near Crash, 90(02), 22–27.
Juliarto, A. (2013). Managerial ownership influencing tunnelling behaviour. Australasian Accounting Business and Finance Journal, 7(2).
Kang, M., Lee, H.-Y., Lee, M.-G., & Park, J. C. (2014). The Association between Related-Party Transactions and Control-Ownership Wedge: Evidence from Korea Minjung. In Pacific-Basin Finance Journal. Elsevier B.V. https://doi.org/10.1016/j.pacfin.2014.04.006
Karim, K., Suh, S. H., & Tang, J. (2016). Do ethical firms create value? Social Responsibility Journal, 12(1), 54–68. https://doi.org/10.1108/SRJ-09-2014-0127
Kuo, J.-M., Ning, L., & Song, X. (2014). The Real and Accrual-based Earnings Management Behaviors: Evidence from the Split Share Structure Reform in China. The International Journal of Accounting, 49(1), 101–136. https://doi.org/https://doi.org/10.1016/j.intacc.2014.01.001
La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54(2), 471–517. https://doi.org/10.1111/0022-1082.00115
Lehuede, H. (2013). Colombian SOEs: A Review Against the OECD Guidelines on Corporate Governance of State-owned Enterprises Héctor. In OECD Corporate Governance Working Papers.
Lemmon, M. L., & Lins, K. V. (2003). Ownership structure, corporate governance, and firm value: Evidence from the East Asian financial crisis. The Journal of Finance, 58(4), 1445–1468.
Lin, K. J., Lu, X., Zhang, J., & Zheng, Y. (2020a). State-owned enterprises in China: A review of 40 years of research and practice. China Journal of Accounting Research.
Lin, K. J., Lu, X., Zhang, J., & Zheng, Y. (2020b). State-owned enterprises in China: A review of 40 years of research and practice. China Journal of Accounting Research, 13(1), 31–55. https://doi.org/10.1016/j.cjar.2019.12.001
Lin, Y., Chiou, J., & Chen, Y. (2010). Ownership Structure and Dividend Preference Evidence from China ’ s Privatized State-Owned Enterprises. Emerging Markets Finance & Trade, 46(1), 56–74. https://doi.org/10.2753/REE1540-496X460106
Lins, K. V, Servaes, H., & Tamayo, A. N. E. (2017). Social Capital , Trust , and Firm Performance : The Value of Corporate Social Responsibility. The Journal of Finance, LXXII(4), 1785–1824. https://doi.org/10.1111/jofi.12505
Lou, F., Wang, J., & Yuan, H. (2014). Causes and consequences of corporate asset exchanges by listed companies in China. International Review of Economics & Finance, 31, 205–217.
Musacchio, A., Lazzarini, S. G., & Aguilera, R. V. (2015). New varieties of state capitalism: Strategic and governance implications. Academy of Management Perspectives, 29(1), 115–131. https://doi.org/10.5465/amp.2013.0094
OECD. (2004). OECD Principles of Corporate Governance 2004.
Oktavia. (2020). Independent Corporate Governance Organs Activities and Tax Avoidance Activities: Evidence from Indonesia. Jurnal Akuntansi, 24(2), 280. https://doi.org/10.24912/ja.v24i2.697
Pilar, N. R., & Joaquina, D. F. (2017). Does Board Gender Diversity Influence Financial Performance ? Evidence from Spain. Journal of Business Ethics, 141(2), 337–350. https://doi.org/10.1007/s10551-015-2735-9
Prabowo, R., Hooghiemstra, R., & Van Veen-Dirks, P. (2018). State Ownership, Socio-political Factors, and Labor Cost Stickiness. European Accounting Review, 27(4), 771–796. https://doi.org/10.1080/09638180.2017.1329659
Probohudono, A. N., Tower, G., & Rusmin, R. (2013). Diversity in Risk Communication. Australasian Accounting, Business and Finance Journal, 7(1), 43–58. https://doi.org/10.14453/aabfj.v7i1.4
Rani, N., Yadav, S. S., & Jain, P. K. (2013). Impact of corporate governance score on abnormal returns of mergers and acquisitions. Procedia Economics and Finance, 5, 637–646.
Rediker, K. J., & Seth, A. (1995). Boards of Directors and Substitution Effects of Alternative Governance Mechanisms. Strategic Management Journal, 16, 85–99. https://doi.org/10.1002/9781119297895.part2
Rusmin, R., & Evans, J. (2017). Audit quality and audit report lag : case of Indonesian listed companies. Asian Review of Accounting, 25(2), 191–210. https://doi.org/10.1108/ARA-06-2015-0062
Ryngaert, M., & Thomas, S. (2012). Not all related party transactions (RPTs) are the same: Ex ante versus ex post RPTs. Journal of Accounting Research, 50(3), 845–882.
Sari, R. C., Ekonomika, F., & Gadjah, U. (2014). Current Asset Tunneling and Firm Performance in an Emerging Market. Jurnal Akuntansi Dan Keuangan Indonesia, 11(2), 165–176.
Shan, Y. G. (2013). Can Internal Governance Mechanisms Prevent Asset Appropriation ? Examination of Type I Tunneling in China. Corporate Governance: An International Review, 21(3), 225–241. https://doi.org/10.1111/corg.12022
Tang, T., & Firth, M. (2011). Can book–tax differences capture earnings management and tax management? Empirical evidence from China. The International Journal of Accounting.
Usman, B. (2019). Ownership Structures, Control Mechanism and Related Party Transaction: An Empirical Study of the Indonesian Public Listed Companies. International Journal of Economics and Management, 13(August 2018), 1–20.
Utama, C. A., & Utama, S. (2014). Corporate governance, size and disclosure of related party transactions, and firm value: Indonesia evidence. International Journal of Disclosure and Governance, 11(4), 341–365. https://doi.org/10.1057/jdg.2013.23
Wan, Y., & Wong, L. (2015). Ownership, related party transactions and performance in China. Accounting Research Journal.
Wang, H.-D., Cho, C.-C., & Lin, C.-J. (2019). Related party transactions, business relatedness, and firm performance. Journal of Business Research, 101, 411–425. https://doi.org/https://doi.org/10.1016/j.jbusres.2019.01.066
Wang, K., & Xiao, X. (2011). Controlling shareholders ’ tunneling and executive compensation : Evidence from China. Journal of Accounting and Public Policy, 30(1), 89–100. https://doi.org/10.1016/j.jaccpubpol.2010.09.014
Whelan, G., & Muthuri, J. (2017). Chinese State-Owned Enterprises and Human Rights: The Importance of National and Intra-Organizational Pressures. Business and Society, 56(5), 738–781. https://doi.org/10.1177/0007650315612399
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Siti Arifah, Rahmawati Rahmawati, Agung Nur Probohudono, Setianingtyas Honggowati, Sri Hartoko, Sri Murni, Kiswanto Kiswanto
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-NonCommercial 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
Abstract views: 282
,
PDF Downloads: 474
