This study investigates the role of internal governance mechanisms in dealing with wealth
expropriation via related party transactions. Specifically, this study identify three forms of
related party transactions namely related lending, related borrowing and related sales to be
exposed against ownership concentration and multiple directorships as part of internal
governance mechanisms. Test is conducted using data sets of the firms affiliated to
business groups in Indonesia which has unique institutional setting with two-tier cotporate
governance system. Multiple directorships and multiple commissionerships are the two
independent variables reflecting the dual board governance system in Indonesia. The
multiple regression results show that minority ownership is negatively related with three
types of related party transactions. The result also finds mixed position of multiple
directorships when dealing with related party transactions. Multiple commissionerships
that suppose to provide monitoring function fail to gain significant relationship toward all
types of transactions. The implication of the finding is that the role of internal governance
mechanisms still not really effective in resolving the problem of wealth expropriation in
the family business environment with high concentration of ownershi
