Related Party Transactions: Associations with Corporate Governance and Firm Value

The Association between Related Party Transactions and Real Earnings Management: Internal Governance Mechanism as Moderating Variables

“…A study also found that companies with weaker corporate governance mechanism have more and higher RPT which imply agency problem between managers and shareholders [6]. Those with better mechanism have less and lower RPT which imply that corporate governance is important in deterring manipulation through RPT.…”

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

“…To the best of our knowledge, there is no empirical research on whether and how internal control has any impact on related party transactions, especially in CSOEs, although some papers study the relationship between corporate governance and related party transactions. Corporate governance has direct effects on related party transactions (Kohlbeck and Mayhew 2004), and weaker corporate governance mechanisms are associated with more and higher dollar amounts of related party transactions (Gordon et al 2004). The quality of corporate governance is important in deterring the use of manipulated transfer prices in relatedparty sales transactions (Lo et al 2010).…”

“…Considering the influence power of these stakeholders in CSOEs, related party transactions attract more attention from researchers and regulatory entities than unrelated party transactions. Fair related party transactions have arm-length prices and normal business processes, which efficiently fulfil underlying economic needs of the company (Gordon et al 2004). However, unfair related party transactions under a weak governance system with agency conflicts are often used to transfer wealth for private benefits of related parties (Chen and Wang 2005;Cheung et al 2009).…”

Corporate Governance and Firm Value: The Impact of the 2002 Governance Rules

“…Table III, Panel A, shows that related party transactions appear across large-, medium-, and small-size firms, and that Purchase and Loans are the most frequent types of related party transactions among our sample firms. Our definition of the different types of related party transactions follows that of Gordon, Henry, and Palia (2004). "Sales" comprises sales of company assets or goods to a related party such as the management or the board.…”

“…"Loans" comprises company loans to management or directors. Table III, Panel B, shows that the average market capitalization of firms that engage in related party transactions is $6.6 billion at the end of fiscal Gordon, Henry, and Palia (2004) and divide related party transactions into four categories. "Sales" comprises sales of company assets or goods to a related party such as the management or the board.…”