KONEKSI POLITIK: MENINGKATKAN ATAU MENURUNKAN KINERJA PERUSAHAAN?

This study seeks to examine the effect of political connections on firm performance and to investigate leverage as a moderator of the causal relationship. Indonesia as one of the emerging countries provides an appropriate research setting for this research. Our sample is 470 Indonesian firms listed at the Indonesian Stock Exchange for the years 2014–2017 with 1.884 firm-years observations. Firm performances divide into two indicators, i.e. accounting performance (ROA) and market performance (Tobin’s Q). We operationalize political connections with the number of politically connected officials in a firm. Leveraged is measured by dividing total liabilities with total assets, both at the end of the year. Based on the panel data regression test, our results demonstrate that political connections decrease firms’ market and accounting performance. Further, the results empirically show that leverage strengthen the impact of political connections on firm performance. This study contributes by adding empirical evidence on the application of the agency theory to investigate the effect of political connections on firm performance in the Indonesian context as an emerging country. Furthermore, Indonesia’s multi-party political system offers research context that is different from other countries.