Controlling Shareholders’ Proxy and Multiple Directorships: Insight Evidence from Related Party Transactions

Abstract

This study examines the association between controlling shareholders' networks (i.e., controlling shareholders' proxy (CSProxy) and controlling shareholders' multiple-directorships (CSMultiD)) and related-party transactions (RPTs), particularly involving controlling shareholders' interests (RPT-conflict). This study also examines the impact of interaction between CSProxy and CSMultiD on firm engagement with RPTs, and RPT-conflict. The hypotheses are tested using a sample of 548 listed companies in Malaysia over the period 2012-2014 with a total of 1,550 observations. The results show that CSProxy is not associated with RPTs, and RPT-conflict. The CSMultiD is also not associated with RPTs. However, it has a positive relationship with RPT-conflict. Additionally, an interaction between CSProxy and CSMultiD increases the likelihood of firms to engage and disclose more RPTs; in contrast, it discloses lower magnitude of RPT-conflict. The opportunistic controlling shareholders may exploit their conflict of interest for private benefits by hiding their intention behind the RPTs. Overall, these findings provide partial empirical support to the argument that controlling shareholders seek to use their network relationship to influence firms to engage with related parties. These findings raise concerns to the regulators and policy makers, specifically on the ability of the controlling shareholders in utilizing their position and networks opportunistically to expropriate firm resources for personal purposes.

Trends of Board Diversity: Who Sits in a Boardroom?

“…A family firm prefers to appoint a family member as part of the board of directors by using their power as a founder and controlling majority shareholder (Villalonga & Amit, 2006;Rahmat et al, 2018). Who is sitting in the boardroom in the family firm?…”

“…Each board member, including family members, has better ideas to enhance better performance. However, family members may be appointed to sit on the board of directors by cronies when procedures or policies are not strictly followed (Gul & Zhang, 2016;Rahmat et al, 2018;Sarkar & Selarka, 2020). The minimum requirement to be on a board of directors is holding a degree, but this requirement may be ignored for family members.…”

Transações com Partes Relacionadas em empresas com estrutura piramidal: uma comparação dos fatores explicativos nas controladoras e coligadas

“…Considerando que a estrutura de controle e a propriedade podem determinar a governança corporativa das empresas, espera-se que o aumento do nível de proteção ao investidor resulte em menor probabilidade de haver estruturas piramidais (Almeida & Wolfenzon, 2006) e TPRs (Kang et al, 2014). No caso das TPRs, a maior parte da literatura demonstrou que TPRs são mais prováveis quando os mecanismos de governança corporativa são fracos (Bhuiyan & Roudaki, 2018;Kang et al, 2014;Rahmat et al, 2018). Em função disso, inseriu-se a seguinte hipótese de pesquisa:…”

“…Portanto, os desvios de direitos e as transações com partes relacionadas podem ser canais de expropriação dos acionistas minoritários. A relação entre esses conceitos baseia-se no pressuposto de que a dominância nos direitos de voto, ocasionada pelos desvios, poderá garantir aos acionistas controladores uma maior capacidade e flexibilidade de se envolverem em TPRs para seus interesses pessoais (Rahmat, Amin, &Saleh, 2018). Tendo em vista esses argumentos, tem-se como objetivo geral analisar os fatores explicativos das TPRs, em empresas controladoras/controladas e coligadas com estrutura piramidal no Brasil.…”

Fraud Detection Gap between Auditor and Fraud Detection Models: Evidence from Gulf Cooperation Council

“…Financial statement fraud is defined as an intentional act of manipulating financial statement through omissions or misstatements to create a false sense of a company's financial health by material misstatements in finance (Pietro 2018). It may also involve real transaction that indirectly affects the financial statement (Jian & Wong 2010;Rahmat et al 2018). The aim of such fraud is to mislead the users by either portraying superior performance to attract investors or by obscuring performance to limit tax liability (Kwok 2017).…”