The impact of intellectual capital and related party transactions on contractual costs

Abstract

Purpose

The present study aims to assess the potential effects of intellectual capital (IC) and disclosure of firms' affiliate transactions on contractual costs (CC).

Design/methodology/approach

The statistical population of the study includes 768 firm-year observations listed on the Tehran Stock Exchange during 2012–2017. According to Pulic's model, the authors divide IC into three components, such as human capital (HC), relational capital and structural capital (SC). CC is also measured by utilising two variables of board cash compensation and unexpected reward of managers.

Findings

The results show that there is a negative and significant relationship between HC and CC. In contrast, the authors find that relational capital and SC have a positive impact on CC. The authors’ further analyses also demonstrate that disclosure of transactions with affiliates has a negative effect on unexpected rewards of managers.

Originality/value

Since there is no conducted study, which discusses the relationship between IC and contractual cost, this paper might be considered the primary studies conducted in this line of literature, specifically in emerging markets. Moreover, to the best of the authors' knowledge, this is the first study investigating the potential impact of disclosure of selling and purchasing transactions, separately, on the director's unexpected reward.

Citation

Salehi, M., Ahmadzadeh, S. and Irvani Qale Sorkh, F. (2022), "The impact of intellectual capital and related party transactions on contractual costs", International Journal of Productivity and Performance Management, Vol. 71 No. 1, pp. 156-181. https://doi.org/10.1108/IJPPM-03-2020-0088