Abstract
This study is to provide empirical evidence about the performance of State-Owned Enterprises in Indonesia with a two-tier board system, on the effect of GCG and tunneling or propping through related transactions. This research uses data in the form of annual reports of State-Owned Enterprises. The results of this study showed that 69% were showing related transactions indicated tunneling and 31% showed related transactions indicated propping. Furthermore, the results obtained that the performance was simultaneously affected by GCG and tunneling. Partially GCG has a positive effect on performance, while tunneling or propping does not affect. The limitation of this research is that there are only 22 state-owned companies whose shares are partly owned by the public, during 2014-2019. The implication is that SOE need to continue to improve GCG to improve SOE’s performance, so that the possibility of tunneling which is a form of detrimental control can be minimized. This study shows that tunneling in state-owned companies is not in the form of taking cash or assets, but taking profits through control, coercion, and regulation. This study uses the performance measure based on the Malcolm Baldridge criteria.
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