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Purpose One of the strongest connections in politics in developing countries is through military links. This study aims to examine the auditor choice preference of the militarily-connected firms in Indonesia, an emerging country where there is a strong influence from the military on political decision-making. Design/methodology/approach The analysis used 3,473 firms-year observations listed on the Indonesian Stock Exchange spanning from 2003 to 2017 using regression and other statistical tests. Findings The results reveal that firms with a militarily-connected director are less likely to appoint one of the Big 4 auditors. Using the military reform as a natural experiment, the finding shows that militarily-connected firms did not change their auditor choice preference even after the military reform. Interestingly, I find that connected firms are associated with high earnings management. In addition, the different retirement position level and military affiliations of the connected directors generate different outcomes related to the auditor choice decision. Overall, the results indicate that militarily-connected firms were less likely to appoint one of the Big 4 auditors both before and after the military reforms. These results are robust, even after the author controlled for political connections, year fixed effects and industry fixed effects. Research limitations/implications Because of the limitations of the prior literature on military connections, this study is developed based on the assumption that the militarily-connected directors have identical behavior whether they serve in either public or private companies. However, this assumption could be invalid which potentially affects the interpretation of some of the results in this study. Originality/value This paper provides direct evidence of the auditor choice preference of firms with a military connection. The evidence builds on the existing literature on the difference in auditor choice preference between politically and militarily-connected firms.

This research is focused on Indonesia-US diplomatic relations in politics and defense. The relationships are very volatile both in terms of closeness and depth of defense cooperation between the two countries. Bilateral defense cooperation is aimed at improving military relations between the two countries and building professionalism of the TNI - in addition to achieving the Indonesian defense goals such as maintaining the sovereignty and integrity of the country. Indonesia has interest in maintaining defense cooperation with the US due to the fact that the majority of Indonesia's major defense equipment is from the US and other western countries. By taking the perspective of the Susilo B. Yudhoyono administration (2004-2014), defense diplomacy is closely related to the Minimum Essential Force (MEF) program. The MEF program has initiated the Indonesian government to cooperate with the US in the context of maintenance and procurement of weapons that have been embargoed since 1999. This research also finds that among various defense cooperation activities between Indonesia and the US, the major one is actually in the field of education and training, e.g., short courses, staff and command education, seminars, post graduate programs and others. Meanwhile, the other defense cooperation activity, namely defense industry, is still very minor until today. The method of research is qualitative using descriptive analytical collected from the interview of practitioners and from secondary sources such book, paper, and open sources