Political Connections and Characteristics of The LQ-45 Index Companies in Indonesia

Abstract

Objective: Political activity relates to the activities of a State. Political activities also can influence decision-making and power. Companies often use politics in executing corporate strategies. The corporate is indicted for having political affiliation or engaging in political activity if one or more of its board of directors, commissioners, or shareholders is involved in political activity. This study aimed to seem at the political connections and characteristics of companies that are politically connected and without political connections within the Indonesia LQ-45 Index. Methodology: The samples during this study were 21 political-connected companies and five companies with no political connections within the Indonesian stock market for 2014-2018. The statistical model wont to test the hypothesis is the Ordinary least squares regression (OLS) Method. Results: The results show that the difference between politically connected and non-politically connected companies is apparent within the company's leverage, but does not show any significant impact on the tax and profitability of the LQ-45 Index companies during the amount 2014-2018. Political connections can only support the financing of enterprise debt. Implication: Characteristics of politically connected and non-politically connected companies are only reflected in leverage corporate but have no effect on tax and profitability payments to the LQ-45 Index companies during the period 2014-2018. Political connections can only support the financing of enterprise debt.