Connected transactions and firm value: Evidence from China-affiliated companies

Lei, Adrian C. H.; Song, Frank M.

doi:10.1016/j.pacfin.2011.07.002

Cited by 40 publications

(36 citation statements)

References 16 publications

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“…Negative cumulative abnormal returns (CAR) have been found for companies that disclose related party transactions (Stouraitis et al 2006). Tobin's Q and market-to-book value are significantly lower for firms undertaking potentially expropriating transactions (Lei and Song 2011). Similar evidences also have been found in listed companies in Shanghai and Shenzhen stock exchanges based on a pre-Reform sample (Li et al 2004).…”

Section: Related Party Transactions and Corporate Valuesupporting

confidence: 54%

Internal control, related party transactions and corporate value of enterprises directly controlled by Chinese central government

Tong

Wang

2014

J. of Chin. Management

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State-owned enterprises (SOEs) play a crucial role in China's economy. Those directly controlled by the central government (CSOEs) take leading positions almost in all industries in China. In this paper, we analyse the impacts of internal control quality of CSOEs on related party transactions and corporate value of CSOEs after the Chinese government introduced regulatory changes and the split share structure reform. Current literature offers little empirical evidence in this area. The primary information collected from 167 questionnaires responded by 22 CSOEs is analysed using structural equation models. We find that internal controls of a higher quality reduce unfair related party transactions for private benefits at the cost of corporate value and hence increase the corporate value of CSOEs. However, the overall perception of the internal control quality of CSOEs is not satisfactory with a mean of 5.3174 based on a seven-point Likert scale. This indicates that effective implementation of internal control is critical for CSOEs after setting up regulations and systems.

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Section: Related Party Transactions and Corporate Valuesupporting

confidence: 54%

Internal control, related party transactions and corporate value of enterprises directly controlled by Chinese central government

Tong

Wang

2014

J. of Chin. Management

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“…On the other hand, if an RPT represents an efficient transaction, then firm value will increase. A number of studies empirically examine stock price reactions of RPT relative to non-RPT announcements (Cheung et al, 2006;Cheung et al, 2009a, b;Utama and Utama, 2009;Hwang et al, 2010;Utama et al, 2010 andLei andSong, 2011). The studies in general find that stock price reactions are lower for RPTs than those for non-RPTs, implying that most RPTs are carried out for abusive reasons.…”

Section: Size Of Rpts and Firm Valuementioning

confidence: 99%

“…2 Empirical studies that investigate the effect of RPTs on firm value or performance are just emerging in recent years. Some studies directly examine the wealth effect of RPTs of listed firms in the Asia Region (Cheung et al, 2006;Cheung et al, 2009a, b;Hwang et al, 2010;Utama et al, 2010, andLei andSong, 2011) by comparing relative stock price reaction between RPT and non-RPT announcements. However, as corporate announcements are made only for large transactions, their samples do not include small and medium RPTs, which are not closely scrutinized by the regulator and the public.…”

mentioning

confidence: 99%

Corporate governance, size and disclosure of related party transactions, and firm value: Indonesia evidence

Utama

Utama²

2013

Int J Discl Gov

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is a research fellow at FEUI. She is also a lecturer in the Bachelor and Master programs at FEUI. Her areas of interest include investment in capital markets, corporate finance and corporate governance. She has authored a number of articles and papers and has presented her research works in international as well as national conference/seminars. Sidharta Utamais a full professor at the University of Indonesia (UI) and is the chairman of the management board of the Indonesian Institute for Corporate Directorship, an NGO aiming to advance good corporate governance practices in Indonesia. He obtained his undergraduate degree in accounting from UI, MBA in finance and information systems from Indiana University, and PhD in accounting from Texas A&M University in 1996. He obtained professional certification as a chartered financial analyst in 1999. At present, he serves as a member of the Tax Oversight Committee, Ministry of Finance, and as a member of the audit committee in a number of listed companies in Indonesia.ABSTRACT This study aims to investigate whether (a) corporate governance (CG) practice has a negative impact on size of Related Party Transactions (RPTs); (b) size of RPTs affects firm value; and (c) better corporate governance practice and higher disclosure on RPTs reduce the negative impact of size of RPTs on firm value. Our sample covers listed companies at the Indonesian Stock Exchange during 2005-2007. We document that better CG significantly reduces the size of RP liabilities and marginally lowers the size of RP assets. Consistent with these findings, we find that size of RPTs has a positive impact on firm value when the transaction involves loans/borrowings from related parties and that it has no impact on firm value when the transaction involves asset placements in related parties. Finally, we find that for companies with less than full disclosure of RPTs, size of RP assets has a negative effect on firm value.

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“…Furthermore, the listing rules require disclosure of all material connected transactions. Besides, there is evidence of tunneling in HK (Cheung et al, 2006, Lei andSong, 2011). Furthermore, family firms are predominant in HK firms, across all sizes and industry.…”

Section: Introductionmentioning

confidence: 99%

“…The prevalence of family controlled firms in HK and their potential incentive to "tunneling" (e.g. Cheung et al, 2006;Lei & Song, 2011) raise the problem of how family firms affect different aspects of monitoring mechanisms, especially for the independent monitoring mechanisms, such as the external audit. Related-party transactions regularly appear in family firms, and internal controls are vastly different from non-family firms.…”

Section: Introductionmentioning

confidence: 99%

Family Ownership, Auditor Choice and Audit Fees: Evidence from Hong Kong

Lei

Lam²

2018

ijafr

Self Cite

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Purpose -The primary purpose of this paper is to examine the impact of family control/ownership on auditor choice and audit fees in Hong Kong. Besides, this paper also addresses the impact of multiple directorship of audit committee members on these two external auditing dimensions. Findings -The results indicate that family firms have a higher likelihood to appoint Big 5 auditors, it supports the signaling hypothesis. Contrasting the perceived higher audit risk, they incur lower audit fees. The results also show the independent audit committee members with multiple directorships are not affected by their busyness. Our results are also robust to the alternative definition of family firms and by using the sub-sample within 2004 -2009. We also find that the firms controlled by recognized Big family in Hong Kong society incur higher audit fees but no support for family firm incurring higher non audit fee.

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Connected transactions and firm value: Evidence from China-affiliated companies

Cited by 40 publications

References 16 publications

Internal control, related party transactions and corporate value of enterprises directly controlled by Chinese central government

Internal control, related party transactions and corporate value of enterprises directly controlled by Chinese central government

Corporate governance, size and disclosure of related party transactions, and firm value: Indonesia evidence

Family Ownership, Auditor Choice and Audit Fees: Evidence from Hong Kong

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