Disclosure Of Related Party Transactions Research Articles

Role and Impact of Private Equity in Mergers and Acquisitions of Publicly Listed Companies

This article discusses the role and impact of private equity funds in the mergers and acquisitions of listed companies. It introduces the historical development of private equity funds, the domestic and international M&A background, as well as the research purpose and significance. The section exploring the role of private equity in the mergers and acquisitions of listed companies discusses the methods of private equity intervention and financial support, along with the relationships and decision-making processes involving other investors. Additionally, the article discusses the impact of M&A funds on market activity and evaluates market price fluctuations. The article delves into the discussion and prevention of risks, covering positive effects and collaborative advantages, regulatory challenges in new models, negative effects and risks, as well as challenges and cooling trends in the models. Future regulatory efforts should focus on strengthening the scrutiny and disclosure of related-party transactions, consolidated financial statements, and announcement disclosures.

Actions of Expropriation in Family Companies: The Moderating Role of Independent Commissioner’s Control

This study examines the effects of the pyramid structure and disclosure of related party transactions on acts of expropriation in family companies with the independent commissioner’s control as a moderation. This research is a type of quantitative research. This research uses secondary data from annual reports from 31 family companies in 2017- 2018. The data analysis techniques in this research are descriptive statistics, panel data regression analysis, and moderated regression analysis. The study finds that the pyramid structure does not affect expropriation, while disclosure of related party transactions has a negative effect on expropriation. The interaction test shows that the mediator variable could not mediate the pyramid structure and expropriation. Conversely, the moderating variable is able to moderate the disclosure of related party transactions and expropriation. The results of this research can provide input to policymakers to tighten regulations regarding protection for minority shareholders. In addition, the results of this research will add to the government’s references in expanding rules related to the disclosure of related party transactions, especially regarding the supervision of related party transactions carried out by companies.

Do cash holdings matter for transactions between affiliated firms? Evidence from BRICS countries

This study aims to look into the effect of cash holdings on related party transactions (RPTs). We also investigate whether the excess cash used for various types of RPTs has any effect on firm value. Our sample includes firms from Brazil, Russia, India, China, and South Africa (BRICS), and we find that RPTs have a negative impact on firm value in Brazil, Russia, India, and South Africa due to agency conflict. Tunneling has a negative impact on firm value in India and China due to the promoter’s opportunistic behavior. We also find that when excess cash is used for RPTs it enhances the firm value in BRICS countries. Using the difference in difference (DID) method, we discover that companies increase their RPT disclosure in the post-mandate compared to the pre-mandate period, augmenting their value. The level of monitoring must vary depending on the nature of RPTs. The negative impact of RPTs is mitigated when excess cash is used for such transactions and RPT disclosure is mandated. We contribute to the RPT literature by demonstrating that tunneling RPTs lower firm value in India and China. Regulators in these countries should implement stringent regulations to reduce value-destroying RPTs. Our findings support agency theory by suggesting that disclosing RPTs in annual reports reduces conflict between controlling and minority shareholders.

Analisis Kesesuaian Tingkat Pengungkapan Transaksi Pihak Berelasi dengan PSAK 7

The purpose of this study aims to describe the level of disclosure of related party transactions in the manufacturing industry and compare between sectors as well as test and analyze its effect on firm value in manufacturing industries listed on the Indonesia Stock Exchange. Research Methods This research is a descriptive study using content analysis in related party reports in annual reports. To perform content analysis on a text, a code is given which is divided into several categories and then analyzed using conceptual analysis or relational analysis. Conceptual analysis functions to analyze and interpret the text by coding the text into manageable content categories. Meanwhile, relational analysis builds on conceptual analysis by examining the relationship between concepts in a text. The results of the study show that with regard to the Disclosure Practices of Related Party Transactions, manufacturing companies as well as other corporate entities listed on the Indonesia Stock Exchange (IDX) refer to the provisions of PSAK 7 of 2018. Related Party Disclosure Practices disclosed in the issuer's annual report can be grouped into 2 namely mandatory disclosure (mandatory disclosure) and voluntary disclosure (voluntary disclosure). The level of disclosure of related party transactions in manufacturing companies that are overall (oscore) gets a score of 64.4% and is categorized as a level of disclosure with moderate/medium compliance. The level of disclosure of related party transactions in manufacturing companies that are mandatory (mandatory) gets a score of 73.8% and is classified into a level of disclosure with a moderate level of compliance. As for voluntary disclosure, it gets a score of 58.2%. And can be classified into the level of disclosure with a low level of compliance.

Bankruptcy in groups

AbstractWe examine bankruptcy within business groups. Groups have incentives to support financially distressed subsidiaries, as the bankruptcy of a subsidiary may impose severe costs on the group as a whole. This is in part because, in several countries, bankruptcy courts often “pierce the corporate veil” and hold groups liable for their distressed subsidiaries’ obligations as if they were their own. Using a large cross-country sample of group-affiliated firms, we show that, by reallocating resources within the corporate structure, business groups actively manage intra-group credit risk to prevent costly within-group insolvencies. Moreover, we document that recent regulatory changes in the approval and disclosure of related party transactions are costly for business groups in that they constrain their ability to shield their subsidiaries from credit-risk shocks. Our study informs the current regulatory debate on related party transactions by highlighting an important cost of anti-self-dealing regulation.

Disclosure of Related Party Transactions Under IFRS: Does Cross-Listing Reduce the Legal Origin Disclosure Gap?

Synopsis The research problem We investigate whether cross-listing in the United States is associated with a reduction in disclosure deficiencies about related party transactions (RPTs) related to the legal traditions of firms’ countries of origin. Motivation The extant literature shows that there is a disclosure disparity associated to the firms’ legal origin (civil or common law) and the countries’ institutions (regulation, enforcement, and market scrutiny). The literature has not examined whether cross-listing in the United States mitigates (or eliminates) the disclosure gap for firms from civil law countries and countries with worse institutions. We focus on RPTs because the US Securities and Exchange Commission has put particular emphasis on regulation of this type of disclosure. Hypotheses H1: Among domestically listed firms, those from countries with common law tradition present superior level of RPT disclosure than firms from countries with a civil law tradition. H2: Cross-listed firms have a superior level of RPT disclosure compared to domestically listed firms from the same country. H3: Among cross-listed firms, those from countries with common law tradition present a superior level of RPT disclosure than firms from countries with a civil law tradition. Target population Firms from countries that have adopted international financial reporting standards (IFRS). We sample firms from the G20 countries that have adopted IFRS because of their representativeness in the world economy. Adopted methodology Ordinary least squares (OLS) regressions with firm and industry-year fixed effects. Two-stage least squares (instrumental variables) regressions to tackle endogeneity issues. Analyses We manually collected data from the financial reports of 531 firms from the G20 countries that have adopted IFRS to compute indices of compliance with disclosures required by IAS 24. We performed double-difference regressions, comparing firms across their legal origin (common law versus civil law), and cross-listing status (cross-listed in the United States versus domestically listed only). In addition, we studied the institutional channels that drive the disclosure gap between common and civil law firms. Findings For domestically listed firms, we found that firms from the common law tradition have RPT disclosure levels superior to those of firms from the civil law tradition. We found that the level of RPT disclosure is associated with countries’ regulatory quality, rule of law, and control of corruption. However, we did not find any differences in the level of RPT disclosure among firms cross-listed in the United States that can be associated with firms’ legal origin or with other home-country institutional features. Our results suggest that the regulatory enforcement and scrutiny of capital markets imposed by the US market compensate for home-country institutional deficiencies and eliminate differences in firms’ RPT disclosures across legal origins.

Transfer Pricing and Related Party Transactions: A Bibliometric Analysis

Abstract In order to create complex business structures and to obtain economic benefits, multinational companies have given rise to transfer pricing. Due to their importance, it has been possible to expand international trade to a higher level. This study focuses on the issue of transfer pricing and related party transactions (RPT), with the aim to overview the productivity and impact of research in transfer pricing and RPT area highlighting the main research trends in the field. 3885 papers extracted in February 2022 from Web of Science and Scopus databases were examined and basic topics debated in research between 1968 and 2021 were identified. The search words used are transfer pricing and RPT. Based on results obtained, the level of development and the main tendencies in terms of impact, core publications, topics, authors, institutions and countries were identified. The analysis of the conceptual structure of keywords via VOSviewer allowed us to obtain their graphic visualisation and to categorise them through their degree of interaction in eight research directions: transfer pricing taxation, accounting, theoretic and economic context, sustainability, innovation and ethics of transfer pricing, RPT disclosure, firm performance, RPT and earnings management, and the fraudulent use of transfer pricing and RPT. The results of bibliometric analysis are helpful to identify the most suitable journals for publication, potential collaborators, and areas for research regarding transfer pricing and RPT issues.

Effects of Related Party Transactions Disclosure on Firms’ Credit Ratings: A Study of Taiwanese Companies Investing in China

Effects of Related Party Transactions Disclosure on Firms’ Credit Ratings: A Study of Taiwanese Companies Investing in China

Auditor-client relationship and related party transactions disclosure: the role of family controlling shareholders from a network perspective

PurposeThis study aims to examine the effect of the auditor-client relationship (ACR) on related party transaction (RPT) types of disclosure, either RPT-efficient or RPT-conflict. This study also examines whether family controlling shareholders (FCS) negatively affect the ACR in RPT types of disclosure.Design/methodology/approachThis study uses multivariate regression on 2,203 year-observations of companies listed in Malaysia during the period 2014–2017.FindingsThis study finds weak evidence that auditors can mitigate companies’ RPT type (RPT-efficient and RPT-conflict) disclosure while maintaining a close ACR. However, an interaction between FCS and ACR reduces the RPT-conflict disclosure. Additionally, the Big 4 auditors slightly increase the RPT-conflict disclosure, however, the relationships are inversed if the close ACR involves the FCS. The Big 4 auditors also increase RPT-efficient disclosure although in a close ACR with FCS. Meanwhile, an interaction between non-Big 4 auditors and FCS in close ACR reduces both types of RPT disclosures.Research limitations/implicationsThe findings suggest that a close relationship between auditors and clients in firms with significant family control could compromise auditor’s skepticism. The FCS can easily influence the auditors to agree with the ways they treat the RPT disclosure. Therefore, policymakers may have to revisit auditors’ rotation policies in Malaysia, especially those involving FCS.Originality/valueTrust, familiarity and future fee dependency are significant threats to auditor independence in a close ACR. This study contributes to the literature by examining the effect of a close ACR on RPT types of disclosure from a network theory perspective.

IAS-24 related party disclosure compliance and corporate governance: evidence from an emerging market

This paper aims to measure the extent of related party transactions disclosure and investigates their determinants in 110 selected firms in Ghana. An index was manually constructed for related party transactions disclosure in accordance with International Financial Reporting Standards (IFRS) (IAS 24) using company financial statements. Empirical results show high mean compliance level of 63% of related party transactions disclosure in Ghana. Furthermore, the multiple regression analysis (OLS) shows that related party transactions disclosure has significant relationships with block-holders' ownership and the presence of an independent audit committee. This is one of the few studies conducted in Sub-Saharan Africa.

The impact of disclosure level and client incentive on auditors’ judgments of related party transactions

PurposeThe purpose of this study is to present the results of an experiment that examines the effects of client management’s increased disclosure of related party transactions (RPTs) on auditors’ judgments of financial reports that contain RPTs.Design/methodology/approachThis study used a 2 × 2 between-subjects experiment to investigate auditors’ judgments in response to questionable RPTs in a Chinese context.FindingsThe results show that the auditor participants assessed a lower likelihood that the client’s financial statements were intentionally misstated and that they were less likely to request additional evidence when the client management chose to disclose more, as opposed to less, detailed RPT information in their disclosure. Moreover, there was a significant interaction between disclosure level and client incentive to manipulate earnings on the likelihood of the auditor requesting additional evidence.Practical implicationsThis study should be of interest to regulatory agencies that have expressed concerns over auditing practices related to RPTs.Originality/valueThe findings from this study help to provide a more in-depth understanding of disclosure literature by investigating voluntary RPT disclosure and the moderation role of clients’ incentives to manipulate earnings.

DETERMINASI PENGUNGKAPAN TRANSAKSI PIHAK BERELASI BERDASARKAN PSAK NO.7 TAHUN 2018

This study aims to examine the effect of Audit Committee, Independent Commissioner, Institutional Ownership, Managerial Ownership, Earnings Management to Related Party Transaction Disclosure. This type of research is quantitative reseacrh using secondary data of financial statements from manufacturing sector companies during 2016 to 2018 obtained from Indonesia Stock Exchange. The sampling technique that used is purposive sampling. The results showed that the Audit Committee, Independent Commissioners, Institutional Ownership, Managerial Ownership and Profit Management were able to influence the disclosure of related party transactions by 13%, while the remaining 87% were influenced by other variables outside this study. Partially, institutional ownership and managerial ownership significantly influence the disclosure of related party transactions. While the audit committee, independent commissioners and earnings management do not affect the disclosure of related party transactions.

Related party transactions disclosure and procedures: a critical analysis in business groups

PurposeIn the light of the risks involved in related party transactions, transparent disclosure is particularly important. The impact of related party transactions is relevant for all types of company, but there is greater complexity in business groups where they can be easier to hide. Focusing on business groups, this study aims to analyze the accuracy and transparency of related party transaction information, its understandability, compliance with legislation and comparability. It also examines whether shareholders can be fully informed of all related party transactions by reading only the consolidated financial statement.Design/methodology/approachThree case studies are used. The units of analysis are three corporate groups in which the parent company is listed on the Milan Stock Exchange as of 1 July 2015. The authors use two different sets of information. The first is secondary data from company procedures, annual reports and other official documents. They analyzed the separate financial statement of each firm, including the separate financial statement of the parent company and compared all relevant information from the consolidated financial statement and the separate financial statement. The second set is primary data from face-to-face semi-structured interviews and observation.FindingsThis study underlines that there is no requirement for a specific classification of related party transactions disclosure, and as a consequence, it is not possible to compare information. An unambiguous framework for disclosure, established by regulation or legislation, for use by companies supplying related party transactions information would be useful.Originality/valueThe results offer possible recommendations for regulators to improve presentation of related party transaction information without increasing the amount of information required.

Controlling shareholders, audit committee characteristics, and related party transaction disclosure: Evidence from Indonesia

The disclosure of related party transactions was required in the financial statements because it is potentially misused by controlling shareholders. This study aims to examine controlling shareholders, audit committee characteristics, and related party transaction disclosure. The controlling shareholders are proxied by the family share ownership and the proportion of the controlling shareholder family members on the board of directors. The samples used in this study are family companies listed on the Indonesia Stock Exchange (IDX) in the year 2017. In this study, the multiple regressions were used to test the hypothesis. We found that controlling shareholders have a negative influence on related party transaction disclosure. Meanwhile, accounting expertise of the audit committee has a positive influence on related party transaction disclosure. Our result show companies that controlled by the family have low motivation to disclose related party transaction disclosure. However, accounting expertise audit committee may encourage companies to disclose related party transactions. JEL Classifications : G32, G34 DOI : https://doi.org/10.26905/jkdp.v23i1.2701

RELEVANSI PENGUNGKAPAN TRANSAKSI PIHAK BERELASI. APAKAH PASAR MEMBERIKAN RESPON?

Information is the result of a number of data processing. The relevance of information related to the usefulness of the information to support decision-making. One of the information in the financial statements which are popular is the information about transactions with related parties. This information is important because it can be used as a tool for management to report its best performance, which in fact is not (earnings management - opportunistic). This study sought to provide empirical evidence about the relevance of the extent of disclosure of related party transactions. Relevance proxies at the company's stock price. The results indicate that the related party transaction information which is proxied by the extent of disclosure of compensation of key management and reported presence of sales and purchases with related parties is relevant to the market Keywords: disclosure, related parties transaction, relevance.

PENGARUH PYRAMID OF STRUCTURE DAN PENGUNGKAPAN TRANSAKSI PIHAK BERELASI TERHADAP TINDAKAN EKSPROPRIASI, DIMODERASI OLEHTATA KELOLA PERUSAHAAN

The objective of this study is to analyze the effect of company’s ownership through pyramid structure, and related party transaction disclousure, on expropriation practices, with corporate governance asmoderating variable. The concept of expropriation practices in this study is measured by related partytransaction assets, liabilities (RPT AL) and related party transaction sales, expenses (RPT SE).Analytical technique used is hierarchical regression analysis for testing hypotheses developed in thisstudy. Research population is a manufacturing company listed in Indonesia Stock Exchange (IDX) during years 2014-2016, and the sample is selected using purposive sampling method. The results of this studyfails to prove effect of company’s ownership through pyramid structure, and related party transactiondisclousure on expropriation practices. Furthermore, this study indicates the corporate governance canto increase the level of related party transactions disclosure, but has not been to reduce the expropriationpractices caused by company’s ownership through pyramid structure. This study contributes to the theory of agency type II which discusses conflict of interest between controlling and non-controllingshareholders, especially the problem of information asymmetry, which can be minimized by the role ofcorporate governance.

ANALISIS PENGARUH PENGUNGKAPAN, TRANSAKSI DAN SALDO PIHAK BERELASI TERHADAP HARGA SAHAM SEKTOR KEUANGAN DI BEI

Statement of Financial Accounting Standards No. 7 describes the disclosure related party which is considered by the investor for being able to show how much the transaction is and which side the company has a related relationship. The purpose of this study is to examine the effect of disclosure, transactions and balances of related parties to the increase of stock price. The data in this research used secondary data obtained from the official website of the Indonesia Stock Exchange listed in 2014-2016 and included in the financial sector companies. The sampling technique used purposive sampling method. The method used in this research through multiple linear regression analysis method, by doing classical assumption test and hypothesis testing so that later get the result of research conclusion. This study performs simultaneous testing between independent variables to the dependent variable. The result of the research shows that: (1) The disclosure of related parties is not proven able to raise the stock price of financial sector companies in 2014-2016 period, (2) Disclosure of related party transactions and balances is not proven able to raise the stock price of financial sector companies in 2014-2016 period.

Pyramid of Structure, Pengungkapan Transaksi Pihak Berelasi, dan Tata Kelola Perusahan : Indikasi Ekspropriasi

The objective of this study is to analyze the effect of company’s ownership through pyramid structure, and related party transaction disclousure, on expropriation practices, with corporate governance as moderating variable. Analytical technique used is hierarchical regression analysis for testing hypotheses developed in this study. Research population is a manufacturing company listed in Indonesia Stock Exchange (IDX) during years 2014-2016, and the sample is selected using purposive sampling method. The results of this study fails to prove effect of company’s ownership through pyramid structure, and related party transaction disclousure on expropriation practices. Furthermore, this study indicates the corporate governance can to increase the level of related party transactions disclosure, but has not been to reduce the expropriation practices caused by company’s ownership through pyramid structure. This study contributes to the theory of agency type II which discusses conflict of interest between controlling and non-controlling shareholders, and especially the problem of information asymmetry, which can be minimized by the role of corporate governance.

The impact of related party transactions on earnings management: some insights from the Italian context

Related party transactions have become a key issue as a result of recent financial scandals. This study examines whether firms use related party transactions for earnings management, and then, whether they try to minimize detection through the format of related party transactions disclosure. Firstly, we analyze the association between related party transactions structure (types and parties involved) and the probability of reporting small earnings increase. Related party transactions may have significant impact on, and implications for, earnings management. According to the agency theory, related party transactions are used opportunistically, while the efficient transaction hypothesis argues that related party transactions meet the economic needs of the business. We next investigate the association between the probability of reporting small earnings increases through related party transactions and disclosure quality. Disclosure quality should be studied in relation to impression management and investor attention; this approach takes account of the idea that earnings management behavior may influence the quality of disclosure as a possible way of lowering conflict of interest. In line with the agency theory, our findings show that revenue related party transactions are more likely to be used to manage earnings than other types of transaction; related party transactions with ultimate parents are associated with lower probability of reporting small earnings increases compared to operations with other related parties. Lastly, our results confirm that the decision to engage in earnings management is related to lower disclosure quality.

Analysis of related party transactions in India: A group and non-group company perspective

Related party transactions (RPTs) which occur between related companies which are commonly reported in published financial reports. Regulations have been enforced by authorities globally, to control and prevent misuse of these types of transactions through extensive disclosure requirements. Research on RPTs in a country is important as it gives an indication of the usage of these transactions by companies during their operations. These transactions need to be tracked as they could be for legitimate reasons or for influencing the performance reports, thereby misleading potential global investors. This paper examines 1) the impact of increased regulatory requirements introduced in India for disclosure of RPTs by listed companies and 2) the usage pattern of RPTs by companies which are part of a Group, as compared to those of standalone companies. Analysis of RPTs reported by 78 non-financial companies (part of the Bombay Stock Exchange Index 100) shows an increasing trend for RPTs reported for the period 2013-15, as compared to 2009-12. This trend is an indication that the regulatory requirements in India through the new Companies Act 2013, is proving to be effective in achieving its objectives. Such regulations passed to improve transparency in financial reporting in India will also act as a deterrent to companies, who may be intending to misuse these transactions in the future. Statistical tests show that Group Companies have a higher value of average annual RPTs, for transactions related to balance sheet and profit and loss accounts, as compared to Non-Group companies. This confirms that Group companies use RPTs extensively in their business operations, for achieving various objectives. Unlike other studies on RPTs in India, this study focuses on the use of these transactions by Group and Non- Group companies separately, over a seven-year period. The study goes into further detail on the different types of RPTs and shows the trend for each type after the revised regulations have been enforced