The unfavorable institutional environment in Indonesia has encourage Indonesia’s firms to engage in related party transaction to be more efficient. More efficient transactions resulting in less cost and eventually increasing firms performance. Meanwhile, corporate governance mechanism is used to preserve stakeholder’s trust, especially shareholders. Greater shreholder’s trusts mean that firms can lower the cost of capital which results in higher cash flow. The aim of this study is to analyze the effect of related party transactions and corporate governance on firms performance. This study measures four types of related party transactions, which is all transaction in assets, liabilities, sales, and purchases. Samples in this study consist of firms that listed in Indonesian Stock Exchange during 2011-2014. This study using random effect model to obtain a conclusion. This study found that related party transactions have no beneficial or harmful effect on firms performance.  The result for corporate governance shows that corporate governance mechanisms have negative effect on firms performance. The conclusion for this study are related party transactions and corporate governace are unable to increase firms performance.