Political Supports and Financial Distress of Companies in Indonesia

Istan, Muhammad (2021) Political Supports and Financial Distress of Companies in Indonesia. Economics Development Analysis Journal, Vol 10 (No 2). pp. 132-142. ISSN P: ISSN: 2252-6560; eISSN: 2502-2725

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Official URL: https://doi.org/10.15294/edaj.v10i2.42831

Abstract

The current study was underlain by the background that many entrepreneurs came into politics and many politicians established companies after having political positions. This study aimed at examining the theory that companies’ finance is influenced by political supports. The problem proposed was how political supports affected the companies’ financial distress in Indonesia. The data of the current study referred to the ratios of finance reported by each company listed in the period of 2010-2019. The samples were purposively solicited by incorporating 63 companies indicated to have political supports for ten years. For testing hypotheses, the analysis technique used simple regression. The results revealed that political supports (PS1, PS2, and PS3) did not significantly affect financial distress (FD). Subsequently, political supports (PS1, PS2, and PS3) also did not significantly affect companies’ performance. The foregoing was caused that the board of directors carried out the companies’ operations independently without political pressure.

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