Performance of Regional Government-Linked Companies in Indonesia: The Influence of State Audit Board and Regulations

ABSTRACT Regional Government-Linked Companies (RGLCs) in Indonesia have suffered from the unhealthy image and loss of respect from the public. The RGLCs are incapable of independently running the companies without financial support from the government. Accordingly, this research determines the effects of audits conducted by the State Audit Board of the Republic of Indonesia on the performance of RGLCs. This study also examines the influence of regulations on the RGLCs’. Agency theory and resource dependence theory provide the bases in developing the proposed hypotheses. The survey questionnaire was used to collect primary data. A total number of 57 out of 113 RGLCs (50.44%) made up the final sample. Each RGLC represented by six respondents, and the total final sample size was 342. The results provide new evidence that the financial audit does not affect the performance of RGLCs, while the Compliance audit indicates a positive effect on the performance of these RGLCs. Keywords: Regional Government-Linked Companies, State Auditor, Agency Theory, Resources Dependence Theory ABSTRAK Syarikat Milik Kerajaan Negeri (RGLCs) di Indonesia telah menderita akibat imej tidak sihat dan hilangnya hormat masyarakat. RGLCs tidak berupaya menjalankan syarikat secara bebas tanpa sokongan kewangan daripada kerajaan. Sehubungan dengan itu, kajian ini memeriksa kesan audit yang dikendalikan oleh Lembaga Audit Negara Republik Indonesia terhadap prestasi RGLCs. Kajian ini juga mengkaji pengaruh peraturan ke atas prestasi RGLC. Teori agensi dan teori kebergantungan sumber menyediakan asas dalam membangunkan hipotesis yang dicadangkan. Soal selidik tinjauan digunakan bagi tujuan mengumpul data primer. Sejumlah 57 daripada 113 RGLCs (50.44%) membentuk sampel akhir. Setiap RGLC diwakili enam responden dan jumlah sampel akhir adalah sebanyak 342. Hasil kajian memberi bukti baharu bahawa audit kewangan tidak memberi kesan ke atas prestasi RGLCs, manakala audit pematuhan menunjukkan kesan positif terhadap prestasi RGLCs. Kata kunci: Syarikat milik kerajaan negeri; juruaudit negara; teori agensi; teori kebergantungan sumber