Effect Of Related Party Transactions Research Articles

Apakah Dewan Komisaris Independen Mempunyai Peran Sebagai Variable Moderasi atas Related Party Transaction, Struktur Modal dan Ukuran Perusahaan terhadap Nilai Perusahaan?

The aim of this study is to investigate the effects of related party transactions and overall business value on capital structure, company size, and an independent board of commissioners. The manufacturing businesses in the food and beverage subsector that were listed on the Indonesia Stock Exchange between 2017 and 2021 are the focus of this study. The research sample consisted of 60 data points from 12 firms that fulfilled predefined parameters, chosen through the use of purposeful sampling. This study employs a quantitative methodology, with Eviews software serving as the analysis tool. The study's findings demonstrate that the value of a firm is not significantly impacted by transactions involving related parties. On the other hand, a company's value is greatly influenced by its size and capital structure. The independent board of commissioners does not lessen the effect that capital structure and related party transactions have on the value of the company. Nonetheless, the effect of a company's size on its value might be lessened by an impartial board of commissioners. The following policies can be implemented by the business world based on the consequences of the research: First, the business sector needs an optimal capital structure, which includes using debt with suitable limits, in order to draw investors and build company value. In addition, using debt might lessen the tax liability of the business. Secondly, in order to draw in investors, big businesses need to manage their assets well.

Related party transactions and earnings quality: the moderating role of female directors

PurposeThis study aims to analyse the effect of related party transactions (RPTs) on earnings quality in a sample of Spanish listed firms, as well as the moderating role played by female directors in the relationship between RPTs and earnings quality.Design/methodology/approachThe sample includes non-financial Spanish listed firms from 2005 to 2019. The authors use panel data analysis based on the firm fixed-effect estimator. Additionally, the authors use the two-step system generalized method of moments estimator to test the robustness of the results.FindingsThe results show a negative effect of RPTs on earnings quality. Further analysis reveals that the negative effect is mainly driven by transactions between the firm and its directors and major shareholders, as well as by RPTs that are more likely to reflect insiders’ self-interest. Moreover, the authors show that the presence of female directors reduces the negative impact of RPTs on earnings quality.Practical implicationsThe study provides practical implications for investors, auditors and policymakers, who should be aware that RPTs might harm earnings quality and adversely affect the flow of financial capital to promising investment opportunities. Additionally, the study evidences the key governance role played by female directors regarding financial reporting policies as RPTs increase.Social implicationsThe findings promote the need for a higher representation of women in leadership positions since the authors reveal the key governance role played by female directors regarding financial reporting policies as RPTs increase.Originality/valueThe results to emerge from the study complement available evidence concerning the effect of RPTs on earnings quality in a continental European country. The authors also provide novel evidence vis-à-vis the role of female directors in the relationship between RPTs and earnings quality.

MODERATING ROLE OF AUDIT QUALITY AND FIRM SIZE ON PRETAX PROFIT MARGIN AND RELATED PARTY TRANSACTIONS: EVIDENCE FROM INDONESIA

This study examines the effect of related party transactions (RPTs) on pretax profit margin (PPM). It analyzes the moderating effect of audit quality and firm size based on a large panel of Indonesian-listed firms. The sample of three representative business groups from 2010–2021 and analysis uses the Generalized Method of Moments (GMM) estimator to control PPM as a proxy of taxable income. We document that this study finds that PPM(t-1) and RPT Sales negatively impact and are significant on firms’ PPM, consistent with the incentive alignment hypothesis. However, RPTs, RPT Loan, and RPT Receivables affect positively. We also find that audit quality strengthens the impact of RPT Loan and RPT Receivables on the PPM negatively and positively significantly; however weakens RPTs, RPT Sales, and RPT Expenses. Moreover, firm size weakens the effect RPTs on PPM. RPTs and tax avoidance are complex and multifaceted phenomena of corporate finance. Additional business groups and variables may have moderating and mediating effects on the impact of taxable income on the business group. Stakeholders, especially the government, should supervise and control RPTs activities comprehensively, especially on the types of RPT Sales and RPT Expenses transactions. The paper offers two contributions. First, it gathers the first evidence on the taxable income and RPTs practices and offers insights into Indonesia’s business group behavior. Second, the analysis examines eleven years considering the sensitivity of audit quality and firm size to RPTs and pretax profit margin.

PERAN KEPEMILIKAN INSTITUSIONAL: PENGARUH RELATED PARTY TRANSACTION TERHADAP NILAI PERUSAHAAN

The aim of this study is to prove the effect of related party transactions on firm value with the moderation of institutional ownership. The data analysis method used are descriptive statistics and hypothesis testing using the Moderated Regression on Analysis (MRA) methods and the Stata 14 application. The population in this study are all non-financial companies listed on the Indonesia Stock Exchange during 2017-2020. This study used a total sample of 363 companies. The results show that related-party transactions harm firm value that can raise concerns of minority shareholders that related-party transactions have the potential for tunelling that will harm them as minority shareholders. That causes capital market investors to react negatively to the company, thereby reducing the value of the company. Institutional ownership moderates the effect of related party transactions on firm value.

Pengaruh Transaksi Pihak-pihak Istimewa terhadap Manajemen Laba: Kepemilikan Institusional sebagai Variabel Moderasi

The purpose of this study was to investigate the effect of related party transactions on earnings management. This study also investigates the role of institutional ownership as a moderator on the effect of related party transactions on earnings management. This study uses agency theory to explain the relationship between variables. The research population consists of all manufacturing companies listed on the Indonesia Stock Exchange. The sample selection used a purposive method which produced 225 observational data. The analytical method used is moderation regression analysis. The results of this study indicate that partially related party transactions have a positive and significant effect on earnings management. Institutional ownership is able to significantly weaken the relationship between related party transactions on earnings management and act as a quasi moderator.

Related party transactions and firm value in an emerging market: Does corporate social responsibility matter?

This study investigates the effect of related party transactions (RPTs) on firm value (FV) with moderating role of corporate social responsibility (CSR) in the context of an emerging market. For a sample of 625 listed firms on the Vietnamese Stock Exchange from 2015 to 2019, we do quantitative analysis utilizing the appropriate method for panel data with modification to strengthen the study’s robustness. We design a regression model to test the result. According to the findings of the study, RPTs have an effect on corporate value. This is in keeping with the belief that CSR reporting, which represents a company’s ethical concerns, might act as a deterrent to opportunism by management. Our study makes recommendations to improve transaction transparency with corporate stakeholders, contributing to the growth of the Vietnamese stock exchange.

Apakah Tunneling Menurunkan Kinerja Perusahaan? Studi Pada Industri Manufaktur di Indonesia

This research aims to determine the effect of related party transactions tunneling on the manufacturing industry accounting performance and market performance. We believe that the higher the tunneling through related party transactions carried out by the company, the lower the company's performance. Related party transactions are measured by related party transactions with account receivable, other receivable and assets other than account receivables and other receivables.This research sample is 175 manufacturing industry companies listed on the Indonesia Stock Exchange (IDX) during 2018-2020 with 525 observations as panel data. This hypothesis examined by panel data regression with Eviews program. Based on panel data regression test, this research found tunneling proxied by related party transactions with assets other than account receivables and other receivables negatively affects financial performance (ROA) means the more industry manufacturing do related party transaction with assets other than account receivables and other receivables ability to earn profit is getting lower. Also, tunneling proxied by related party transactions with assets other than account receivables and other receivables negatively affects market performance (TOBIN), the more industry manufacturing do related party transaction with assets other than account receivables and other receivables decrease ability of investment profit sharing make share price weak. This finding align with the type II agency theory that the majority shareholder dominates the minority shareholder causing agency conflict.

Do related party transactions affect family firm valuations?

AbstractWe examine the likelihood and value relevance of related party transactions in family firms. Based on an extensive hand‐collected sample, we find that founder‐led family firms are more likely to enter into related party transactions than other firms. We also find that the founder‐led family firm valuation premium is reduced when these firms disclose related party transactions, especially opportunistic related party transactions. We also examine the significant change in related party transaction reporting regulations enacted in 2006 and find that it led to a decline in the number of value‐decreasing related party transactions for founder‐led family firms. We find a corresponding decrease in the detrimental effect of related party transactions on founder‐led family firms’ valuation. Our results suggest that changes in the 2006 SEC related party transaction reporting regulations better protected minority shareholders from wealth extraction via related party transactions in founder‐led family firms.

The effect of related party transactions on R&D investment: Evidence from Korea

This study aims to investigate the relationship between related party transactions and a firm’s investment in research and development (R&D), as well as the moderating effect of a firm’s financial health on such a relationship. The study applies a fixed-effect panel regression model with a sample of 13,619 Korean listed firms for the period from 2001 to 2020. The results indicate that related party transactions significantly and positively influence a firm’s R&D investment at the 1% level for the study period. Specifically, when related party transactions are divided into operating and non-operating, the results show that only non-operating related party transactions significantly and positively affect firms’ investment in R&D. Moreover, findings report that the effect of related party transactions is stronger for firms with financial distress, lower cash holdings, and in the high-tech industry. The results imply that related party transactions promote a firm’s R&D investment, which is one of the primary business investments that create a firm’s competitive advantage and value. Moreover, the results propose that related party transactions should be carefully evaluated when accessing the firm’s investment behavior.

The Effect of Related Party Transaction, Financial Distress, and Firm Size on Tax Avoidance with Earnings Management as Intervening Variable

This study aims to determine the effect of related party transactions, financial distress, and firm size on tax avoidance with earnings management as an intervening variable. The population in this study is manufacturing companies listed on the Indonesia Stock Exchange from 2018 - 2020, with a total of 168 companies. The sampling method used is a purposive sampling; 51 companies in the manufacturing sector are selected as samples. The analysis technique used is multiple linear regression and path analysis tests with the Eviews analysis tool. The results of this study are that related party transactions and financial distress have a negative effect on tax avoidance, while firm size has no effect on tax avoidance. Related party transactions and financial distress have no effect on earnings management, while firm size has a positive effect on earnings management. After being mediated by earnings management, firm size has a positive effect on tax avoidance, while related party transactions and financial distress have no effect on tax avoidance.

The Influence of Related Party Transaction, Profitability, Liquidity, and Debt Policy on Firm Value in Property and Real Estate Companies Listed on IDX 2016-2020 with Firm size as a Moderating Variable

This study aims to determine how the effect of related party transactions, profitability, liquidity, and debt policy on firm value in Property and Real Estate companies listed on the Indonesia Stock Exchange. In addition, this study also aims to determine whether firm size can be used as a moderating variable in this research model. The type of research conducted is causal associative research. The population in this study are Property and Real Estate companies listed on the Indonesia Stock Exchange from 2016-2020. The sample in this study was determined by using the judgment sampling technique. The number of observations in this study amounted to 190 data. And the analysis used in this research is the Multiple Linear Regression Analysis, and Interaction Test performed with the help of SPSS Software. The results in this study indicate that partially related party transactions and liquidity are proven to have a negative and significant effect on firm value in Property and Real Estate companies listed on the Indonesia Stock Exchange. Profitability has a positive and significant effect on firm value. Meanwhile, other results show that firm size is proven to moderate the effect of related party transactions and profitability on firm value. Keywords: Related party transactions, profitability, liquidity, debt policy, firm value, and firm size.

Do related party transactions affect the relationship between political connections and firm value? Evidence from Egypt

This paper aims to (i) investigate the impact of political connections (PC) and related party transactions (RPTs) on the firm value (FV), and (ii) test the moderating effect of RPTs on such relationship, while controlling for the firms’ corporate governance mechanisms. Based on 315 observations from publicly listed firms in Egypt, our results reveal that (i) there is a positive relationship between PC and the FV, (ii) there is a negative relationship between RPTs and the FV, and (iii) the existing of RPTs as a moderating variable enhances the impact of the politically connected companies on the FV. The findings suggest that the Egyptian firms are much affected by the politically connected board of directors or owners, and this significantly exists when associated with related party transactions, despite that, the corporate governance practices could mitigate such effects.

Related party transactions and audit fees in a dominant owner context

ABSTRACT By adopting an integrated theoretical approach, which combines supply and demand forces, the current work examines the effect of related party transactions (RPTs) on audit fees in a sample of non-financial Spanish listed firms during the period 2005–2017. Our results show a negative effect of the amount involved in RPTs and external audit fees. Thus, in a context where both investor protection and litigation risk are low and where ownership concentration is prevalent, audit fees are less likely to incorporate agency conflicts associated to RPTs and, in contrast, are mainly affected by auditee needs.

The Effects of Earnings Management, Related Party Transactions and ESG Management of Chaebol Firms on Corporate Performance in Korea

Purpose - This study investigates the effects of earnings management, related party transactions between chaebol affiliates on earnings management and ESG score on their profitability using return on assets (ROA). Design/Methodology/Approach - We use data including ESG (Environmental, Social, and Corporate Governance) score of the Korea Corporate Governance Service(KCGS), and financial data of 10,145 firm-year observations from the Total Solution 2000 (TS 2000) and Korea Companies-Information Service (KOKOInfo), and apply the finite lagged models to investigate the long-term effects of related party transactions between chaebol affiliates of earnings management on ESG scores and corporate performance. Furthermore, to take into consideration the simultaneous mutual effects on each other of main variables, we introduce finite distributed lags of five years. Findings - First, ESG-rated firms have a higher total asset return than non-ESG-rated firms. Second, chaebol firms have a higher profitability than non-chaebol firms. Third, profit management of related party transactions between affiliates within a chaebol has a positive effect on the short-term profitability and a negative effect on the long-term profitability. Fourth, chaebol ESG firms have a lower impact on profitability due to rating up (down) than non-chaebol ESG firms. Research Implications or Originality - Based on the above results, it can be concluded that firms used related party transactions for earnings management, the effects of related party transactions change over time, and chaebol firms manipulate earnings through related party transactions and ESG scores.

The effects of related party transactions on firm performance: empirical evidence from Malaysia

The effects of related party transactions on firm performance: empirical evidence from Malaysia

RELATED PARTY TRANSACTIONS AND EARNINGS MANAGEMENT IN MANUFACTURING COMPANIES IN INDONESIA

This study examines the effect of the number of related party transactions (RPT) on earnings management through accruals and real earnings management in manufacturing companies listed on the Indonesia Stock Exchange (IDX). The effect of RPT is seen from the entire amount of RPT recorded in the company's financial statements divided by the company's total assets (RPTOTAL). This study uses secondary data from the S&P Capital IQ and company annual reports that the public can access on the IDX website. The sampling technique used purposive sampling. There were 732 observations from 164 manufacturing companies during the 2014-2018 period—data analysis using multiple regression with the fixed-effects model. The results showed that the amount of RPT has a significant positive effect on accrual earnings management. However, there is no effect of the RPT amount on real earnings management. RPT is a transaction carried out for expropriation of minority shareholders, and to cover RPT losses, management has an incentive to manipulate through earnings management. This study contributes to the effect of RPT on earnings management in manufacturing companies in Indonesia. This study is a valuable starting point for similar research in other developing countries.

The Effect of Propping on the Performance of the Financial Industry in Indonesia

This study aims to determine the effect of related party transactions propping on the financial industry's financial performance and performance market performance. This research sample is 66 financial industry companies listed on the Stock Exchange Indonesia (IDX) during 2017-2019 with 198 observations as panel data. Based on the panel data regression test, this research found propping proxied by related party transactions account payables, related party transactions with other payables and related party transactions liabilities other than account payables do not positively affect the company's financial performance (ROA). Propping is proxied by related party transactions, account payables, and liabilities other than account payables do not positively affect the market performance of industrial companies' finance. Meanwhile, propping proxied by transactions of other debt-related parties positively affects financial industry companies' market performance (Tobin's Q). The findings align with transaction cost theory and the efficient transaction hypothesis that related party transactions are efficient transactions to boost company performance.

Related party transactions and corporate environmental responsibility

We examine the effect of related party transactions on corporate environmental responsibility and find that firms with more related party transactions tend to have more controversial environmental reports, less emissions reduction, and less environmental expenditures. This relationship is more significant for firms with a high investment-cash flow sensitivity and those with a low ESG score. Overall, the results corroborate the hypothesis that the marginal costs of corporate environmental responsibility outweigh the benefits for financially constrained firms, thus deterring these firms from engaging in corporate environmental responsibility activities.

The Relationships among Related Party Transactions, Exports and Earnings Management in Korea

Purpose - We investigate the effects of exports and related party transactions on earnings management. In addition, we study their simultaneous multilateral effects on each other in as well as their long-term effects investigated with time lags. Design/Methodology/Approach - In this study, a merged data set of accounting, financial market, and export activities of 8,687 firms listed on Korea Exchange (KRX) from 2006 to 2018 is used. We collect data from TS 2000 database. Then, we formally test our hypotheses using fixed effects models (FEM) and simultaneous equation models (SEM). Findings - First, export firms have more severe earnings management than non-export firms. Second, earnings management has a positive effect on related party transactions for the non-export firms. Third, related party transactions for export firms have a negative effect on earnings management. Fourth, simultaneous equation models verified above mentioned conclusions. Fifth, the effects of earnings management on exports lasted for years while those of exports on earnings management lasted for years. However, the effects of related party transactions on both exports and earnings management lasted only for a year. Research Implications - Based on above findings, we can conclude that firms use exports and related party transactions for earnings management and that firms use related party transactions to manipulate exports of firms. Thus, traditional way of studying earnings management using discretionary accruals might shift focus to related party transactions, especially for export firms with subsidiaries abroad.

Analysis of the Related Party Transactions in terms of managerial and financial issues for the Kenyan Savings and Credit Cooperatives

Related party transactions are a key factor to the sustainability of Savings and Credit Cooperatives (SACCOs). In view of this fact, loans to directors and staff are viewed as a factor which can greatly influence savings and credit cooperatives into either falling into financial distress or helping them to remain a float and become financially stable entities. The stakeholder theory holds that entities should be managed a manner that will satisfy every stakeholder. The stewardship theory reiterates that managers have the organisation at heart and can it to profitability as if it were their own. However approval of loans and other transactions to managers and staff, may not positively impact the entity. This study was designed to establish the effect of related party transactions on the relationship between board characteristics and financial distress of deposit taking SACCOs in Nairobi County. We applied Descriptive research design on Deposit taking SACCOs in Nairobi County which was identified purposively while a census was conceded for all deposit taking SACCOs in the county. We obtained secondary data from SASRA using a data collection sheet after which we performed panel data analysis by use of STATA software. Findings were presented using tables. The study concluded that related party transactions influenced the relationship between board characteristics and financial distress of Deposit Taking SACCOs in Nairobi County. Related party transactions can be an avenue of causing financial distress and should be kept as low as possible. The regulator should come up with a tool based on Altman’s Z score models to predict financial distress in SACCOs in order to offer timely advice to alleviate more distress and consequent bankruptcy which may lead to closure of SACCOs. Another research may be carried out to establish other factors causing financial distress and how to turn around the SACCOs already in distress.