Mohammad Nasih, - and Admiralty SaAvira Al-Cholili, - and Iman Harymawan, - and Imran Haidar, - and Nadia Klarita Rahayu, 041511333150 (2020) Political connections, overinvestment and governance mechanism in Indonesia. Cogent Economics & Finance, 8 (11). pp. 1-12. ISSN 2332-2039

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Abstract

The purpose of this study is to investigate the association between political connections and overinvestment in Indonesia as a democratic, multi-party and developing country. This study uses sample of 1,044 and 543 firm-year observations from listed firms on the Indonesian Stock Exchange from 2012 to 2017. A two-stage model is used to address overinvestment, which used two different measurements, then continued by ordinary least square regression to establish the main analysis result. This study finds that political connection is negatively associated with overinvestment in Indonesia. We also find that this negative association is increasing due to the existence of governance mechanism from both external and internal parties of the firm. Our results indicate that the significant negative associations between political connections with overinvestment, which later is strengthen by governance mechanism might be caused by several differences in institutional setting and/or political connections benefits between the previous research in China and with the place where this research is taken. This paper could give insights in decision-making for stakeholders to anticipate certain harmful issues to the companies that might be occurred by their politically connected top management like directors and commissioners.

Item Type:	Article
Uncontrolled Keywords:	overinvestment; political connections; government mechanism
Subjects:	H Social Sciences H Social Sciences > HG Finance H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation
Divisions:	04. Fakultas Ekonomi dan Bisnis > Akuntansi
Creators:	Creators NIM Mohammad Nasih, - NIDN0006086503 Admiralty SaAvira Al-Cholili, - UNSPECIFIED Iman Harymawan, - NIDN0020048403 Imran Haidar, - UNSPECIFIED Nadia Klarita Rahayu, 041511333150 UNSPECIFIED
Depositing User:	Tn Sugeng Riyanto
Date Deposited:	07 Feb 2022 00:34
Last Modified:	16 Jun 2023 03:46
URI:	http://repository.unair.ac.id/id/eprint/113405
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