ABSTRACT
The purpose of this study is to investigate whether the size of firms affects the relationship between political connections and firm value in Indonesia. The sample of this study is firms listed on the Indonesian Stock Exchange in the period 2008-10. This study uses regression analysis. Results show that politically connected firms with size above the median have a positive impact on firm value. Interestingly, results show that politically connected firms with size below the median are associated with negative firm value. These findings indicate that the size of firms can help us to differentiate the outcome of connected firms. Therefore, the results of this study imply that the size of connected firms is an important determinant to define the motivation of these firms in establishing political connections.
