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Transactions between a firm and its own managers, directors, principal owners or affiliates are known as related party transactions. Such transactions, which are diverse and often complex, represent a corporate governance challenge. This paper initiates research in finance on related party transactions, which have implications for agency literature. We first explore two alternative perspectives of related party transactions: the view that such transactions are conflicts of interest which compromise management’s agency responsibility to shareholders as well as directors’ monitoring functions; and the view that such transactions are efficient transactions that fulfill rational economic demands of a firm such as the need for service providers with in-depth firm-specific knowledge. We describe related party transactions for a sample of 112 publicly-traded companies, including the types of transactions and parties involved. This paper provides a starting point in related party transactions research.

The purpose of this study is to examine the relation between related party transactions and both accrual and real earnings management practices in Jordanian industrial public-listed companies, taking into account the uniqueness of the Jordanian company ownership structure.

Data were collected from Jordanian industrial public-listed companies for the period 2011–2017. Accrual earnings management is measured by using the modified Jones model, whereas real earnings management and related party transactions are measured by using relevant proxies. A regression model is developed and used to assess the relation between related party transactions and earnings management, taking into account the effects of ownership concentration, family ownership and institutional ownership levels of the companies involved.

Accrual earnings management is negatively associated with related party transactions. Regarding the role of ownership structure, the presence of institutional investors is positively associated with using both related party transactions and real earnings management, whereas ownership concentration plays an efficient role to mitigate the use of both accrual earnings management and related party transactions. No statistically significant relations between real earnings management and related party transactions exist.

This study has direct practical implications for the Jordanian regulatory authorities to enact regulations to limit the misuse of related party transactions and earnings management transactions and ensure sufficient monitoring of these transactions because of their prevalence. Jordanian companies should also enhance their corporate governance systems to better approve and monitor such transactions, including enhancing the role of independent and non-controlling board members in this process.

Related party transactions are considered as a major concern of financial reporting quality in developed countries, and such transactions are found to be relatively more problematic in developing countries, where corporate governance is generally weak, and there is limited disclosure and transparency in financial reporting. From this perspective, this study is one of the very few studies in developing countries that explore the issue of related party transactions and their association with earnings management practices. Thus, the findings of this study can arguably be to some extent generalized to other developing country contexts, because of relatively similar business environment conditions, and therefore potentially fill a gap represented by the paucity of similar studies in developing countries.

The purpose of this study is to determine the impacts of related party transactions on the performance of Islamic banks in Pakistan. In addition, this study aims to determine whether corporate governance mechanisms enhance company performance and mitigate agency problems associated with related party transactions in the Islamic banks.

Sample includes all Islamic banks domiciled in Pakistan from 2017 to 2021. To run the regression models, the regression assumptions about normality, heteroskedasticity, autocorrelation and multicollinearity are determined.

This study finds that institutional ownership has a significant impact on mitigating agency problems associated with tunneling. Related party borrowings indicate expropriation and conflict of interest, whereas related party revenues indicate propping and efficient transactions.

This study uses data from all Islamic banks and specialized Islamic branches working in Pakistan. In the future, data of other institutions offering Islamic finance in Pakistan and in other emerging economies can be used to determine the role of related party transactions.

A thorough understanding of related party interrelationships in the Islamic banking system is essential, as these transactions can result in either the creation of wealth or the destruction of wealth. It is also necessary to determine the type of transactions that ultimately benefit Islamic investors.

The impacts of different related party transactions (in terms of cash inflows and outflows) of Islamic banks are investigated. Prior studies generally look at the impact of related party transactions on firm performance in totality.

The published annual report and accounts of a company are regarded as a main source of information for making investment and other decisions. One assumption used by readers of such accounts is that the financial statements reflect transactions which have been made at arm's‐length. However, the presence of related parties may mean that free market dealings do not exist. In this case the accounts are, at best, misleading and, at worst, fraud may have been perpetrated. Although a number of countries have issued accounting standards which require companies to disclose certain information in respect of related party transactions, this had not occurred in the UK by the summer of 1995. A proposal had been issued by the Accounting Standards Committee (ASC), but this received severe criticism and could not be amended before the ASC was disbanded. Its successor body, the Accounting Standards Board (ASB) has issued its own proposals, taking into account some of the earlier criticisms. The proposals attempt to define related parties, the transactions which are entered into and the disclosures which should take place. The most recent proposals have also received severe criticism mainly because of the additional work entailed for companies and their auditors in relation to the possible benefits to be gained by the users. An examination of the new proposals reveal that there are some definitional problems and that it is far from certain that the disclosures will do more than alert the reader to the presence of related party transactions, nor is it certain that the disclosures will provide information which is useful for sophisticated decision making and it would be naive to believe that such disclosures would prevent fraud.

This study aims to examine the effect of ownership concentration and foreign ownership on tunneling activities in Indonesia.

The population in this study were manufacturing companies listed on the Indonesian Stock Exchange from 2014 to 2018. The total observations used in this study were 557 observations. This study used three measurements to assess tunneling activities in a company, namely, related party receivables (TUL1), related party payables (TUL2) and related party receivables-payables (TUL3).

The results of this study indicated that ownership concentration and foreign ownership had a negative effect on tunneling activity of TUL1. Meanwhile, the effect of ownership concentration and foreign ownership on TUL2 and TUL3 showed a positive effect. This indicated that manufacturing companies in Indonesia preferred to carry out tunneling activities through related party payables compared with related party receivables. Foreign ownership was also effective in controlling the company’s tunneling activities when the company conducted tunneling transactions of related party receivables. Small companies and companies with positive return on assets were more susceptible to tunneling activities carried out by the companies.

The results of this study can be used as a consideration for investors in making decisions by looking at tunneling activities carried out by companies in Indonesia.

To the best of the authors’ knowledge, no previous study in the tunneling literature has compared the results of the effect of the concentration of foreign ownership and ownership on tunneling using three measurements at once. This is useful to see the company’s behavior of tunneling activities from a different perspective.

Prior studies suggest that most expropriation of firm’s resources is conducted through related party transactions (RPTs). Based on the conflict of interest view, related parties opportunistically use their authorities to expropriate firms’ resources for their own benefits via RPTs subsequently increasing agency costs and reduce firm value. One important monitoring system suggested by agency theory to reduce the agency problem is corporate governance (CG). CG monitors firm’s performance to align the interests of those who control and those who own the residual claims in a firm. The purpose of this paper is to investigate the moderating effect of CG characteristics on the relationship between RPTs and firm value.

In order to clarify the distinct effect of RPTs, this study categorises RPTs into two groups including beneficial and detrimental RPTs (DRPTs). Applying “proportionate stratified random sampling”, this study covers a panel of 271 firms listed on Bursa Malaysia over the period of 2009–2011, using a moderated multiple regression model.

This study documents that firm value is positively associated with beneficial RPTs (BRPTs) and negatively related to detrimental RPTs (DRPTs). In addition, results show that divergence can intensify the negative relationship between DRPTs and firm value. Findings support the necessity for more scrutiny by regulators, policy makers and standard setters to monitor the conflict of interests in RPTs and restrain the power of related parties to protect the firm’s wealth by introducing stricter regulations for RPTs and improve CG practices especially to monitor RPTs in order to limit the opportunistic behaviour of related parties.

Research implications have been presented in Section 10. It has also been summarised in practical implications and social implications sections.

The findings of this study indicate that investors, creditors and policy makers should not consider all RPTs as harmful transactions and it seems necessary to categorise RPTs into different groups including transactions which are detrimental and transactions which are beneficial to the firm.

The findings of this study support the necessity for more scrutiny by regulators, policy makers and standard setters to monitor the conflict of interests in RPTs. They should restrain the power of related parties to protect the firm’s wealth by introducing stricter regulations for RPTs and improving CG practices especially to monitor RPTs in order to limit the opportunistic behaviour of related parties.

This study contributes to the RPTs literature by showing that the effect of RPTs on firm value depends on the types of RPTs, and market participants allocate different values to different types of RPTs. Therefore, to fill the gap and clarify the distinct effect of RPTs, this study categorizes RPTs into two groups including beneficial and detrimental RPTs.

Purpose – This study investigates the status of related party disclosure in an emerging economy, that is, India. The reason behind concentrating on India is due to its opening of the economy in 1991 to attract foreign investment. Hence, it is significant that investors are provided with credible information. The accounting value of ‘secrecy’ underlying India and the voluntary nature of detailed reporting about related parties in this country further motivated the present study.

Methodology/Approach – The research method includes a content analysis of the ‘related party disclosure’ section of annual reports of a sample of Indian companies for the financial years 2002–2006.

Findings – Indian companies disclosed more than the required minimum level of related party disclosure as required in the Indian accounting standard. No association between related party disclosure with market capitalization, industry affiliation and foreign listing was found for the year 2006. However, when the scores of all the five years 2002–2006 were considered manufacturing and automotive companies disclosed more about related parties than diversified, service and technology.

Research Limitations – The limitations of our findings rests upon the fact that we have not examined the effect of factors such as the composition of management of each company and the presence of Indians/Non-Indians in management.

Originality/Value of the Paper – Most studies exploring disclosure practices are directed towards developed countries. The disclosure practices in developing countries is an under researched area. This paper contributes towards the existing literature by taking the case of an emerging economy, that is, India.

This paper aims to analyse how the supreme audit institution (SAI) monitors related party transactions (RPTs) in the Brazilian public sector. It considers definitions and disclosure policies of RPTs by international accounting and auditing standards and their evolution since 1980.

Based on archival research on international standards and using an interpretive approach, the authors investigated definitions and disclosure policies. Using a topic model based on latent Dirichlet allocation, the authors performed a content analysis on over 59,000 SAI decisions to assess how the SAI monitors RPTs.

The SAI investigates nepotism (a kind of RPT) and conflicts of interest up to eight times more frequently than related parties. Brazilian laws prevent nepotism and conflicts of interest, but not RPTs in general. Indeed, Brazilian public-sector accounting standards have not converged towards IPSAS 20, and ISSAI 1550 does not adjust auditing procedures to suit the public sector.

The SAI follows a legalistic auditing approach, indicating a need for regulation of related public-sector parties to improve surveillance. In addition to Brazil, other code law countries might face similar circumstances.

Public-sector RPTs are an under-investigated field, calling for attention by academics and standard-setters. Text mining and latent Dirichlet allocation, while mature techniques, are underexplored in accounting and auditing studies. Additionally, the Python script created to analyse the audit reports is available at Mendeley Data and may be used to perform similar analyses with minor adaptations.

In recent decades, related party transactions have been assailed by scholars and regulation authorities since related parties of a listed company may “tunnel” its resources, damaging the interests of other stakeholders. One kind of “tunneling” is capital impropriation, which is common but harmful in an emerging market where investor protection is weak. In contrast, a listed company may also impropriate capitals from its controlling business group or related parties reported as accrued liabilities in the financial statement of the listed company, which can be regarded as the “supporting hand” from related parties. Thus, the capital impropriation may be bidirectional. In fact, the capital impropriation is a financing behavior with low cost, and it can provide necessary working capital for some firms and reduce that for the other. Since the working capital is an important part of the firm's stock of capital, which can relax firms' short‐run financing constraints, it may significantly influence firms' capital investment behaviors. Therefore, how does the bilateral capital impropriation influences the capital investment of listed firms?

Using the data of Chinese listed firms in 2005 and 2006, this paper empirically investigates the effect of bidirectional capital impropriation on listed firms' capital investment efficiency.

Receivable items like accounting receivable or other accruals that related parties owe to the listed firms will reduce the capital expenditure of listed companies and reduce the sensitivity of investment‐cash flow relation. Actually, capital impropriation by listed firms may stimulate their capital investments and increase the sensitivity of investment‐cash since listed firms obtain capitals for future investments at a lower cost. In all, the bidirectional capital impropriation significantly affects the capital investment and sensitivity of investment‐cash flow of listed firms, and different direction of capital impropriation will lead to different investment efficiency. It should also be noted that capital impropriation is not necessarily something negative since it may sometimes reduce the overinvestment.

The paper provides more evidence to the capital investment of listed companies and identifies the factors influencing its efficiency from the perspective of bidirectional capital impropriation.

Investigates the differences in protocols between arbitral tribunals and courts, with particular emphasis on US, Greek and English law. Gives examples of each country and its way of using the law in specific circumstances, and shows the variations therein. Sums up that arbitration is much the better way to gok as it avoids delays and expenses, plus the vexation/frustration of normal litigation. Concludes that the US and Greek constitutions and common law tradition in England appear to allow involved parties to choose their own judge, who can thus be an arbitrator. Discusses e‐commerce and speculates on this for the future.