The Influence of Managerial Strategy and Political Connections and Company Size on Company Value
DOI:
https://doi.org/10.21776/ijabs.2022.30.3.695Keywords:
Managerial strategy, Political Connections, Company Size, Company ValueAbstract
Purpose - This study aims to test the Influence of Managerial Strategy, Political Connections, and company size on Company Value using secondary data on banking companies listed on the Indonesia Stock Exchange from 2013 to 2021.
Design/Methodology/approach—The sample selection method used purposive sampling with several criteria, resulting in 383 participants. In addition, this study used simple and multiple linear regression analysis techniques.
Finding—The results showed empirical evidence that a banking company's managerial strategy cannot increase its value. Political connections also negatively affect company values. Political connections tend to get convenience facilities from the government to reduce the company's value. The size of the company can increase its value.
Practical implications—This research can also provide input into making policies and regulations in Indonesia regarding managerial strategies, political connection practices, and company sizes related to company values.
Originality/value—This research has implications for theoretical enrichment. The agency is mainly concerned with the performance of companies with political connections. In addition, it enriches stakeholders' theories about managerial strategies for company value by increasing company investment.
Keywords — Managerial strategy, Political Connections, Company Size, Company Value
Paper Type: Quantitative Research
References
Amran, A., Lee, S. P., & Devi, S. S. (2014). The influence of governance structure and strategic corporate social responsibility toward sustainability reporting quality. Business Strategy and the Environment, 23(4), 217–235. https://doi.org/10.1002/bse.1767
Ang, J. S., Ding, D. K., & Thong, T. Y. (2013). Political connection and firm value. Asian Development Review, 30(2), 131–166. https://doi.org/10.1162/ADEV_a_00018
Bel, G., González-gómez, F., & Picazo-tadeo, A. J. (2015). Political connections , corruption , and privatization of public services : Evidence from contracting out water services in Spain. 28.
Berkman, H., & Galpoththage, V. (2016). Political connections and firm value: an analysis of listed firms in Sri Lanka. Pacific Accounting Review, 28(1), 92–106. https://doi.org/10.1108/PAR-06-2014-0020
Bidhari, S. C., Salim, U., Aisjah, S., & Java, E. (2013). Effect of Corporate Social Responsibility Information Disclosure on Financial Performance and Firm Value in Banking Industry Listed at Indonesia Stock Exchange. European Journal of Business and Management, 5(18), 39–47.
Brunelle, É. (2005). An Empirical Analysis of the Strategic Use of Corporate Social Responsibility Donald S. Siegel Department of Economics Rensselaer Polytechnic Institute 3506 Russell Sage Laboratory 110 8th Street Troy, NY 12180-3590 Tel: (518) 276-2049 Fax: (518) 276-2235. March, 25–27.
Chen, Y., Luo, D., & Li, W. (2014). Political connections, entry barriers, and firm performance. Chinese Management Studies, 8(3), 473–486. https://doi.org/10.1108/CMS-08-2013-0148
Cooper, S. A., Raman, K. K., & Yin, J. (2018). Halo effect or fallen angel effect? Firm value consequences of greenhouse gas emissions and reputation for corporate social responsibility. Journal of Accounting and Public Policy, 37(3), 226–240. https://doi.org/10.1016/j.jaccpubpol.2018.04.003
Diono, H., Jatmiko, T., & Prabowo, W. (2017). Analisis Pengaruh Mekanisme Corporate Governance, Profitalbilitas, Dan Ukuran Perusahaan Terhadap Tingkat Pengungkapan Sustainability Report. Diponegoro Journal of Accounting, 6(3), 615–624.
Dunnas, I., Basri, H., Arfan, M., Intelektual, P. M., Perusahaan, U., Struktur, D. A. N., Terkonsentrasi, K., Dunnas, I., Basri, H., & Arfan, M. (2020). Nilai Perusahaan Pada Perusahaan Perbankan Di Bursa Efek Indonesia. Jurnal Perspektif Ekonomi Darussalam, 6(September), 72–81.
Faccio, M., Dame, N., Caprio, L., Fisman, R., Mcconnell, J., Mitton, T., Schultz, P., & Stolin, D. (2002). Politically – connected firms : Faccio (Issue 219).
Fitri Prasetyorini, B. (2013). Pengaruh Ukuran Perusahaan, Leverage, Price Earning Ratio Dan Profitabilitas Terhadap Nilai Perusahaan. Jurnal Imu Manajemen, 1(1), 183–196.
Francis, B. B., Hasan, I., Sun, X., & Wu, Q. (2016). CEO political preference and corporate tax sheltering. Journal of Corporate Finance, 38, 37–53. https://doi.org/10.1016/j.jcorpfin.2016.03.003
Ghozali, I. (2018). Aplikasi Analisis Multivariate dengan Program IBM SPSS (9th ed.). Badan Penerbit Universitas Diponegoro.
Guerra Pérez, S., Bona Sánchez, C., & Santana Martín, D. J. (2015). Politically connected firms in Spain. BRQ Business Research Quarterly, 18(4), 230–245. https://doi.org/10.1016/j.brq.2014.10.002
Gujarati, D. N., & Porter, D. C. (2010). Dasar-Dasar Ekonometrika (Edisi V). Salemba Empat.
Habek, P. (2017). CSR reporting practices in Visegrad Group countries and the quality of disclosure. Sustainability (Switzerland), 9(12), 1–18. https://doi.org/10.3390/su9122322
Habib, A., Muhammadi, A. H., & Jiang, H. (2017). Political connections, related party transactions, and auditor choice: Evidence from Indonesia. Journal of Contemporary Accounting and Economics, 13(1), 1–19. https://doi.org/10.1016/j.jcae.2017.01.004
Handayani, M., Farlian, T., & Ardian, A. (2019). Firm Size, Market Risk, and Stock Return: Evidence from Indonesian Blue Chip Companies. Jurnal Dinamika Akuntansi Dan Bisnis, 6(2), 171–182. https://doi.org/10.24815/jdab.v6i2.13082
Haris, M., Yao, H., Tariq, G., Javaid, H. M., & Ul Ain, Q. (2019). Corporate governance, political connections, and bank performance. International Journal of Financial Studies, 7(4). https://doi.org/10.3390/ijfs7040062
Idris, F., Buchdadi, A. D., Muttaqien, M. R., & Hariguna, T. (2020). The role of the board of director with political connection for increasing the firm value. Accounting, 6(7), 1285–1290. https://doi.org/10.5267/j.ac.2020.8.023
Ioannou, I., & Serafeim, G. (2012). The Consequences of Mandatory Corporate Sustainability Reporting. SSRN Electronic Journal, 11, 1–46. https://doi.org/10.2139/ssrn.1799589
Ismail, M. (2009). Corporate Social Responsibility and Its Role in Community Development: an International Perspective. The Journal of International Social Research, 2(9), 199–209.
Jensen, C., & Meckling, H. (1976). THEORY OF THE FIRM : MANAGERIAL BEHAVIOR , AGENCY COSTS AND OWNERSHIP STRUCTURE I . Introduction and summary In this paper WC draw on recent progress in the theory of ( 1 ) property rights , firm . In addition to tying together elements of the theory of e. Journal of Financial Economics 3, 3, 305–360.
Kiliç, M., Kuzey, C., & Uyar, A. (2015). The impact of ownership and board structure on corporate social responsibility (CSR) reporting in the Turkish banking industry. Corporate Governance (Bingley), 15(3), 357–374. https://doi.org/10.1108/CG-02-2014-0022
Kim, C. F., & Kim, C. F. (2016). Corporate political connections and tax aggressiveness. Contemporary Accounting Research., 33(1), 78–114.
Kim, J. H., & Lee, J. H. (2021). How ceo political connections induce corporate social irresponsibility: An empirical study of tax avoidance in south korea. Sustainability (Switzerland), 13(14). https://doi.org/10.3390/su13147739
Kohlbeck, M., & Mayhew, B. W. (2010). Valuation of firms that disclose related party transactions. Journal of Accounting and Public Policy, 29(2), 115–137. https://doi.org/10.1016/j.jaccpubpol.2009.10.006
Ling, W., Jhou, L.-Y., Chan, Y.-T., Wang, W.-H., Lin, Y.-T., & Wei, C.-C. (2016). Do Corporate Governance and Social Performance Differ between Family-Owned and Non-Family-Owned Businesses in Taiwan-Listed CSR Companies? Asian Economic and Financial Review, 6(1), 15–26. https://doi.org/10.18488/journal.aefr/2016.6.1/102.1.15.26
López-pérez, M. E. (2017). Identifying Links between Corporate Social Responsibility and Reputation: Some Considerations for F. Journal of Evolutionary Studies in Business-JESB, 2(2), 191–230. https://doi.org/10.1344/jesb2017.2.j034
Mais, R. G., Sukoharsono, E. G., Rahman, A. F., & Mulawarman, A. D. (2018). Concept of Corporate Social Responsibility According to Perspective of Ihsan on Sharia Banking. Advances in Economics, Business and Management Research, 73, 178–181. https://doi.org/10.2991/aicar-18.2019.38
Masud, M. M., Gao, J., Khan, L., Han, J., & Thuraisingham, B. (2009). Integrating novel class detection with classification for concept-drifting data streams. Lecture Notes in Computer Science (Including Subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics), 5782 LNAI(PART 2), 79–94. https://doi.org/10.1007/978-3-642-04174-7_6
Ming, J. J., & Wong, T. J. (2005). Earnings Management and Tunneling through Related Party Transactions: Evidence from Chinese Corporate Groups. In SSRN Electronic Journal. https://doi.org/10.2139/ssrn.424888
Motilewa, D., Worlu, R., Moses, C., & Adeniji, C. (2017). Corporate Social Responsibility as a Determinant of Sustainability of Small Medium Enterprises (SMEs). Covenant Journal of Business & Social Sciences, 8(2), 76–86.
Nasih, M., Al-cholili, A. S., Harymawan, I., Rahayu, N. K., Nasih, M., Al-cholili, A. S., Harymawan, I., & Haider, I. (2020). Cogent Economics & Finance Political connections , overinvestment and governance mechanism in Indonesia Political connections , overinvestment and governance mechanism in Indonesia. Cogent Economics & Finance, 8(1). https://doi.org/10.1080/23322039.2020.1790220
Oberholzer-gee, F. (2003). Political Relationships , Global Financing and Corporate Transparency Christian Leuz. Management.
Patriarini, W. E. (2020). Pengaruh Koneksi Politik terhadap Nilai Perusahaan. Jurnal Alimtansi, 30(6), 1550–1560.
Pérez, A., & Lopez-Gutierrez, C. (2017). Análisis empírico de la relación entre la calidad de la información de las memorias de RSC y la reputación corporativa en empresas cotizadas en España. Academia Revista Latinoamericana de Administracion, 30(1), 87–107. https://doi.org/10.1108/ARLA-02-2016-0036
Pratama, versiandika yudha, & setiawan, doddy. (2019). Political connection and firm value. Sebelas Maret Business Review, 3(1), 1–7. https://doi.org/10.1162/ADEV_a_00018
Rao, A. (2005). Cost frontier efficiency and risk-return analysis in an emerging market. International Review of Financial Analysis, 14, 283–303. https://doi.org/10.1016/j.irfa.2004.10.006
Reimsbach, D., Hahn, R., & Gürtürk, A. (2018). Integrated Reporting and Assurance of Sustainability Information: An Experimental Study on Professional Investors’ Information Processing. European Accounting Review, 27(3), 559–581. https://doi.org/10.1080/09638180.2016.1273787
Saeed, A., Belghitar, Y., & Clark, E. (2019). Political connections and corporate performance: Evidence from Pakistan. Economics of Transition and Institutional Change, 27(4), 863–889. https://doi.org/10.1111/ecot.12213
Saha, A. K., & Akter, S. (2013). Corporate Governance and Voluntary Disclosure Practices of Financial and Non-Financial Sector Companies in Bangladesh. Journal of Applied Management Accounting Research, 11(2), 45–61.
Saraswati, E., Sagitaputri, A., & Rahadian, Y. (2020). Political Connections and CSR Disclosures in Indonesia. Journal of Asian Finance, Economics and Business, 7(11), 1097–1104. https://doi.org/10.13106/jafeb.2020.vol7.no11.1097
Supatmi, Sutrisno, T., Saraswati, E., & Purnomosidhi, B. (2019). The effect of related party transactions on firm performance: The moderating role of political connection in indonesian banking. Business: Theory and Practice, 20(2003), 81–92. https://doi.org/10.3846/BTP.2019.08
Tilt, C. A. (2016). Corporate social responsibility research: the importance of context. International Journal of Corporate Social Responsibility, 1(1), 1–9. https://doi.org/10.1186/s40991-016-0003-7
Valdez-Juárez, L. E., Gallardo-Vázquez, D., & Ramos-Escobar, E. A. (2018). CSR and the supply chain: Effects on the results of SMEs. Sustainability (Switzerland), 10(7), 1–27. https://doi.org/10.3390/su10072356
Walsh, J. P., Weber, K., & Margolis, J. D. (2003). Social issues and management: Our lost cause found. Journal of Management, 29(6), 859–881. https://doi.org/10.1016/S0149-2063(03)00082-5
Winarno, W. W. (2015). Analisa Ekonometrika dan Statistika dengan Eviews (IV). UPP STIM YKPN.
Wong, W. Y., & Hooy, C. W. (2021). Politically connected firms and their stock return volatility during high-visibility events: Evidence from Malaysia. International Journal of Business and Society, 22(3), 1449–1468. https://doi.org/10.33736/ijbs.4314.2021
Wu, J., & Cheng, M. L. (2011). The impact of managerial political connections and quality on government subsidies: Evidence from Chinese listed firms. Chinese Management Studies, 5(2), 207–226. https://doi.org/10.1108/17506141111142834
Yogiswari, N. L. P. P., & Badera, I. D. N. (2007). Pengaruh Board Diversity Pada Nilai Perusahaan Dalam Perspektif Corporate Governance. Jurnal Akuntansi Dan Keuangan, 9(2), 88–95. https://doi.org/10.24843/eja.2019.v26.i03.p15
Zhang, C. (2017). Political connections and corporate environmental responsibility: Adopting or escaping? Energy Economics, 68, 539–547. https://doi.org/10.1016/j.eneco.2017.10.036
Zhao, X., Ma, H., & Hao, T. (2019). Acquirer size, political connections and mergers and acquisitions performance: Evidence from China. Studies in Economics and Finance, 36(2), 311–332. https://doi.org/10.1108/SEF-05-2017-0112
Downloads
Published
Issue
Section
License
Copyright (c) 2022 The International Journal of Accounting and Business Society

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
The copyright of the received article shall be assigned to the journal as the publisher of the journal. The intended copyright includes the right to publish the article in various forms (including reprints). The journal maintains the publishing rights to the published articles.