This paper examines relationship of related party transaction on managerial ownership and corporate governance mechanism. Using 91 publicly traded Indonesia firms during 2004-2006. Data were collected from Indonesian Capital Market data (ICMD), firm annual report and financial statement which are published in Indonesia Stock Exchange official website. Regression method and SAS software helped us examine relationship of related party transaction (dependent variable) on managerial ownership and corporate governance mechanism (independent variables).
Our results show that managerial ownership is negatively correlated to related party transaction especially for firms which is the managers hold ownership above 3% in that company. For corporate governance mechanism, our results show that only number of the directors in the board variable has positive relationship with related party transaction. The remaining corporate governance mechanism variables show not statistically significant result with negative coefficient. Our findings remind principal that the manager will be work more effective when their ownership is high

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