Related Party Transactions and Earnings Quality PDF Download

Author: Elizabeth A. Gordon
Publisher:
ISBN:
Category :
Languages : en
Pages : 45

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In this paper, we investigate whether related party transactions are associated with earnings management. If a firm's executives and/or board members engage in related party transactions to expropriate the firm's resources, then they have incentives to manage earnings either to justify (or increase) these perquisites or possibly to mask such expropriation. An alternative view is that related party transactions rationally fulfill other economic demands of a company, for example, by providing access to in-depth skills and expertise or providing an alternative form of compensation. If this were the case, there would be no incentives to manage earnings since the related party transaction need not be obscured or offset; consequently, we would not expect a relation between earnings management and related party transactions. In our paper, we first provide a comprehensive empirical description of the types of related party transactions in which companies engage and then investigate whether related party transactions are associated with earnings management. We present a description of the number of, the parties involved with, the types of and where available, the dollar amounts of related party transactions for 331 publicly-traded companies in fiscal years 2000 and 2001. In our earnings management tests, we present evidence that adjusted absolute abnormal accruals (our earnings management measure), are positively associated with limited types of transactions such as fixed-rate financing from related parties. Overall, it appears that concerns about related party transactions as a factor associated with earnings management are warranted, but for only certain related party transactions. The mere presence of related party transactions is not necessarily an indication that a firm is likely to engage in greater earnings management.

Author: Muhamad Shfri Daie
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Moataz El-Helaly
Publisher:
ISBN:
Category :
Languages : en
Pages : 45

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Related party transactions (RPTs) are considered a potential tool for shareholders' wealth expropriation, as they offer opportunities to transfer wealth between the firm and related parties. While considerable evidence has been reported on the negative consequences of RPTs (declines in shareholder wealth, lowered accounting quality and an increased likelihood of financial fraud), studies examining how RPTs may be used in earnings management are relatively rare. Therefore, we aim to provide evidence on how RPTs and earnings management are related. Consequently, we investigate whether RPTs are associated with real or accrual earnings management or used as a third alternative to manage reported earnings. Our study employs a sample of firms listed on the Athens Stock Exchange during the period between 2009 and 2014. Our results confirm that, on average, real earnings management and RPTs appear to be used as substitutes. However, additional tests show that this substitution is not significant if the firm is audited by one of the Big 4 auditors. Contrarily, we do not find any significant association between accrual earnings management and RPTs. Our evidence adds to understanding around the interplay between RPTs and earnings management and how audit quality can affect the relationships investigated.

Author: Vieira, Elisabete S.
Publisher: IGI Global
ISBN: 1799875989
Category : Business & Economics
Languages : en
Pages : 433

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Book Description
New trends are emerging regarding earnings management and corporate governance showing similarities and striking differences in the practices of different countries and economies. These new trends currently shape the field of modern corporate governance with crucial issues being looked at in governance law and practices, accounting systems, earnings quality and management, stakeholder involvement, and more. In order to advance these new avenues in corporate governance, research looks at accounting policies firms use in different opportunistic circumstances in order to manage earnings, the corporate governance practices in different countries, firm performance, and other dimensions of companies. The understanding of these topics is beneficial in understanding the current state of different types of firms and their practices in modern times. Comparative Research on Earnings Management, Corporate Governance, and Economic Value is focused on the investigation of key challenges and perspectives of corporate governance and earnings management and outlines possible scenarios of its development. The chapters explore this new avenue of research and cover theoretical, empirical, and experimental studies related to different themes in the global context of earnings management and corporate governance. This book is ideal for economists, businesses, managers, accountants, practitioners, stakeholders, researchers, academicians, and students who are interested in the current issues and advancements in corporate governance and earnings management.

Author: Stijn Claessens
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 36

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This paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-96. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially-constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.

Author: Alberto Chong
Publisher: World Bank Publications
ISBN: 0821369148
Category : Business & Economics
Languages : en
Pages : 584

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Book Description
'Investor Protection and Corporate Governance' analyzes the impact of corporate governance on firm performance and valuation. Using unique datasets gathered at the firm-level the first such data in the region and results from a homogeneous corporate governance questionnaire, the book examines corporate governance characteristics, ownership structures, dividend policies, and performance measures. The book's analysis reveals the very high levels of ownership and voting rights concentrations and monolithic governance structures in the largest samples of Latin American companies up to now, and new data emphasize the importance of specific characteristics of the investor protection regimes in several Latin American countries. By and large, those firms with better governance measures across several dimensions are granted higher valuations and thus lower cost of capital. This title will be useful to researchers, policy makers, government officials, and other professionals involved in corporate governance, economic policy, and business finance, law, and management.

Author: Ming Jian
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 188

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Author: Sa'adiah Haji Munir
Publisher:
ISBN:
Category : Family corporations
Languages : en
Pages : 45

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Book Description

Author: Kose John
Publisher: Emerald Group Publishing
ISBN: 1783501219
Category : Business & Economics
Languages : en
Pages : 269

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Book Description
Advances in Financial Economics Vol. 16 contains a set of empirical papers by a set of global scholars who examine corporate governance and market regulation from a variety of perspectives.

Author: Uptal Bhattacharya
Publisher:
ISBN: 9789616430258
Category :
Languages : en
Pages : 27

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