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

Abstract

PurposeThis 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/approachAn index was manually constructed for related party transactions disclosure in accordance with International Financial Reporting Standards (IFRS) (IAS 24) using company financial statements.FindingsEmpirical 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/implicationsThis paper does not control for some corporate governance mechanisms such as audit committee characteristics.Practical implicationsThis paper provides useful guidelines for several stakeholders including policy makers, accounting standard setters and corporate managers.Originality/valueIFRS (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.