Related party transactions disclosure in the emerging market of the United Arab Emirates

Abstract

Purpose This paper aims to measure the extent of related party transactions disclosure and investigates their determinants across all listed companies in the United Arab Emirates (UAE) stock market during 2010 to 2012. Design/methodology/approach An index was manually constructed for related party transactions disclosure in accordance with International Financial Reporting Standards (IFRS) (IAS 24) using company financial statements. Findings Empirical results show relatively low level of related party transactions disclosure in the UAE emerging market. Furthermore, the multiple regression analysis (OLS) shows that related party transactions disclosure has significant relationships with the number of board members, audit quality, block-holders’ ownership, company size, leverage and product market competition. The multiple regression analysis (OLS) also highlights that industry type plays a significant and crucial role in disclosure levels across companies. Research limitations/implications This paper does not control for some corporate governance mechanisms such as audit committee characteristics. Practical implications This paper provides useful guidelines for several stakeholders including policy makers, accounting standard setters and corporate managers. Originality/value IFRS (IAS 24) standards were used to measure the strength of related party transactions disclosure. In addition, several variables were tested such as corporate governance mechanisms, ownership structure and product market competition on related party transactions disclosure over time; in an emerging market such as the UAE.

The effect of audit committee attributes on compliance with IAS 24-related party disclosure

“…Thus, the concentration of ownership is relevant for monitoring RPD. This is consistent with the study predictions of ElKelish (2017) and Huafang and Jianguo (2007).…”

“…With regard to RQ1 , the study found that RPTD show high mean compliance level of 26 per cent and ranges from a minimum of 6 per cent to a maximum value of 55 per cent with a standard deviation of 7 per cent. The author agrees with ElKelish (2017), who argued that such low disclosure compliance maybe due to management discretion and/or lack of appropriate regulatory enforcement mechanisms. With regard to RQ2 , the study found that ACGD, an independent audit committee and block ownership concentration (BOC) are the factors that influence RPTD in the sampled firms.…”

“…In a similar study, Sellami and Fendri (2017) reported a mean compliance level of 77 per cent for listed firms in South Africa. ElKelish (2017) on the other hand reported of a low mean compliance level of 12 per cent. The findings also confirm Agyeman et al (2013) assertion that though Ghana has sufficient laws and regulations with respect to corporate governance, the major challenge is the absence of active devices for their effective enforcement.…”

“…RPTD show a low mean compliance level of 26 per cent and ranges from a minimum of 5 per cent to a maximum value of 55 per cent with a standard deviation of 6 per cent. ElKelish (2017) argued that such low disclosure compliance maybe due to management discretion and/or lack of appropriate regulatory enforcement mechanisms. In a similar study, Sellami and Fendri (2017) reported a mean compliance level of 77 per cent for listed firms in South Africa.…”

Examining the Relationship between Political Connections, Related Party Transactions, and Firm Value in Egyptian Listed Companies: Empirical Study

“…The agency problem arises when the principal delegates a decision making authority as an agent. The agent can make profits at the expense of the principals and stakeholders as suggested by information asymmetry theory (Elkelish, 2017;Pratama, 2018). The agency conflict can be expanded into a conflict between majority and minority stockholders.…”