Related party sales and firm value: the moderating role of dispersed institutional ownership, debt and timeliness of financial reporting

This study aims to examine the negative relationship between related party sales (RPS) and firm value (FV) and further investigates the moderating effects of dispersed institutional ownership (DIO), debt (D) and timeliness of financial reporting (TFR) on this relationship. This study was conducted on non-financial companies listed on the Indonesia Stock Exchange (IDX) during the period 2015–2023. Sampling was based on specific criteria, namely companies with DIO and RPS. The final sample included 81 companies with 594 firm-year observations, analyzed using moderation regression with unbalanced panel data. The results of this study find that RPS has a negative effect on FV. Number of DIO (NDIO) does not reduce the negative effect of RPS on FV. DIO, D and TFR reduce the negative RPS effect on FV. Furthermore, in the sample groups of companies with domestic DIO (DIOd), foreign DIO (DIOf) and mixed DIO (DIOm), no evidence was found that such ownership reduce the negative effect of RPS on FV. Finally, we conclude that RPS provides an avenue for majority shareholders to extract private benefits in the Indonesian context. However, this negative effect can be reduced by DIO, D and TFR.