Corporate governance and detrimental related party transactions

2019 ◽  
Vol 27 (2) ◽  
pp. 196-227
Author(s):  
Masood Fooladi ◽  
Maryam Farhadi
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Social Implications ◽  
Policy Makers ◽  
Content Type ◽  
Conflict Of Interests ◽  
Related Party Transactions ◽  
Distinct Effect ◽  
Opportunistic Behaviour ◽  
Practical Implications

PurposePrior 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.Design/methodology/approachIn 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.FindingsThis 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 limitations/implicationsResearch implications have been presented in Section 10. It has also been summarised in practical implications and social implications sections.Practical implicationsThe 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.Social implicationsThe 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.Originality/valueThis 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.

scholarly journals The impact of related party transactions on firm value

2019 ◽  
Vol 17 (3) ◽  
pp. 571-588
Author(s):  
Ahmed A. Diab ◽  
Ahmed Aboud ◽  
Arafat Hamdy
Keyword(s):  
Firm Value ◽  
Design Methodology ◽  
Emerging Market ◽  
Content Type ◽  
Related Party Transactions ◽  
Intermediary Role ◽  
The Impact ◽  
The Relationship ◽  
Practical Implications

Purpose The purpose of this study is to address the impact of the related party transactions (RPTs) on firm value. The authors bring evidence from a usually ignored empirical setting: an African emerging market. Design/methodology/approach In particular, the authors focus on companies listed on the Egyptian stock market using a sample of EGX 30 from 2012 to 2017. Findings Unlike the literature, the authors find no significant relationship between RPTs and market value. Practical implications This research provides insights for policymakers and other interested parties concerning the perception of RPTs in Egypt. Originality/value The reported different findings of this study assure the intermediary role of the context and the local culture in the relationship between RPTs and firm value, in contrast to the negative view that is mostly reported in the literature.

Conflict management and resolution in family-owned businesses

2015 ◽  
Vol 5 (2) ◽  
pp. 140-156 ◽  
Author(s):  
Keanon Alderson
Keyword(s):  
Corporate Governance ◽  
Family Business ◽  
Family Firms ◽  
Original Research ◽  
Negative Effects ◽  
Policy Makers ◽  
Content Type ◽  
Governance Tools ◽  
Business Practitioners ◽  
Practical Implications

Purpose – The purpose of this paper is to review the literature concerning the negative effects of conflict among family businesses and to make practitioner focussed recommendations for the prevention, management, and resolution of conflict. This paper discusses the prevalence of conflict in family firms, differentiates the types of conflict present, and recommends proven approaches to prevent and manage the conflict, with a focus on corporate governance tools. Examples of well known companies are presented. Design/methodology/approach – A review was conducted of the literature concerning family business conflict and corporate governance. Findings – Conflict is a common problem in family firms that has significant consequences for the business and the family. Research has shown effective governance may reduce and manage conflict. Research limitations/implications – This was a literature review. As such it did not perform original research. Practical implications – This paper has practical implications for family business practitioners. The paper offers the negative aspects of conflict and recommends effective mechanisms such as governance tools to enable the prevention, management, and resolution of conflict. Social implications – Implications exist for practitioners and policy makers in order to reduce conflict and increase the viability of family firms. Originality/value – The scholarly literature has been reviewed and synthesized into distillation for family business owners.

Independent Directors' Tenure, Expropriation, Related Party Transactions, and Firm Value

2022 ◽  
pp. 369-394
Author(s):  
Chee Yoong Liew ◽  
S. Susela Devi
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Moderating Effect ◽  
Ownership Concentration ◽  
Independent Directors ◽  
Policy Makers ◽  
Related Party Transactions ◽  
Financial Valuation ◽  
Agency Conflict ◽  
The Relationship

This chapter analyses the relationship between related party transactions (RPT) and firm value and whether independent directors' tenure (IDT) strengthens or weakens this relationship. Further, it examines ownership concentration's role on this moderating effect of IDT in Malaysian family and non-family corporations. It is found that that IDT weakens the relationship between RPT and firm value. However, ownership concentration strengthens this moderating effect of IDT. Interestingly, family corporations are more likely to show a stronger impact of ownership concentration which we allude to concerns of maintaining reputation. The research results remain after controlling for technology corporations. The findings' have important implications for policy makers, practitioners and regulators, especially in emerging economies globally.Keywords: Agency Conflict, Corporate Financial Valuation, Independent Directors' Term in the Office, Corporate Governance, Family Corporations, Emerging Markets

Related-party transactions: a review of the regulation, governance and auditing literature

2018 ◽  
Vol 33 (8/9) ◽  
pp. 779-806 ◽  
Author(s):  
Moataz El-Helaly
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Negative Effects ◽  
Audit Risk ◽  
Policy Makers ◽  
Content Type ◽  
Related Party Transactions ◽  
Corporate Scandals ◽  
Increased Risk ◽  
Starting Point

PurposeSeveral studies, especially in Asian economies, have investigated the antecedents, implications and consequences of related-party transactions (RPTs). This paper aims to review this literature to collate, gauge and critically discuss understandings of the relationship between RPTs and risk, with a particular focus on audit risk.Design/methodology/approachThe paper discusses RPTs and how they have been associated with corporate scandals and the expropriation of shareholders’ wealth. RPTs are defined as per accounting standards and the main types of RPTs are described based on the extant literature. Two key research design issues are discussed: measures used to operationalize RPTs and observable variations in sample size across RPT studies. Evidence is presented on the negative effects of RPTs and the role of regulation, corporate governance and auditing in reducing risks.FindingsPrior studies have associated RPTs with the expropriation of shareholders’ wealth, declining firm valuations, lower-quality financial reporting, increased risk of material misstatements and decreases in long-term firm performance. Further, the evidence suggests that regulation, corporate governance and auditing can mitigate the negative effects of RPTs.Practical implicationsThis paper provides insights for regulators on the effects of enforcement, corporate governance and external audits on reducing the negative effects of RPTs, and highlights the increased risk of material misstatements in financial statements when RPTs are conducted. Moreover, it reveals how RPTs affect risk assessments for auditors.Originality/valueThis paper represents the first comprehensive review of the empirical RPT literature. It provides a starting point for future investigations of RPTs, not least because it reveals important limitations with the extant body of research in this domain. It also offers salient insights and implications for practitioners and policy makers.

Corporate governance and the variability of stock returns

2014 ◽  
Vol 10 (4) ◽  
pp. 494-510 ◽  
Author(s):  
Hardjo Koerniadi ◽  
Chandrasekhar Krishnamurti ◽  
Alireza Tourani-Rad
Keyword(s):  
Corporate Governance ◽  
Stock Returns ◽  
Stock Option ◽  
Data Availability ◽  
Firm Level ◽  
Policy Makers ◽  
Content Type ◽  
Governance Quality ◽  
The Impact ◽  
Practical Implications

Purpose – The purpose of this paper is to analyze the impact of firm-level corporate governance practices on the riskiness of a firm's stock returns. Design/methodology/approach – The authors constructed an index of governance quality incorporating best practices stipulated by regulators. The authors employed regression analysis. Findings – The empirical evidence, using an index of corporate governance, shows that well-governed New Zealand firms experience lower levels of risk, ceteris paribus. In particular, the results indicate that corporate governance aspects such as board composition, shareholder rights, and disclosure practices are associated with lower levels of risk. Research limitations/implications – A limitation of the study is that the corporate governance index constructed is somewhat arbitrary and due to limitation of data availability the authors may have excluded some factors such as share trading policy of directors and policies regarding provision of non-auditing services by auditors. The research supports the view that institutional context could have an impact on governance outcomes. The work has three implications for managers, investors, and policy makers. First, the results imply that well-governed firms have lower idiosyncratic risk and that this reduction is most likely due to the reduction in agency costs and information risk. Second, in the absence of features like an active corporate control market and stock option based managerial compensation, managers have little incentives to take on risky projects that increase firm value. Third, the results suggest that the managers of well-governed firms are not more risk averse with respect to investment decisions compared to poorly governed firms. Practical implications – The work has practical implications for managers, investors, and policy makers. Well-governed firms face lower variability in stock returns compared to poorly governed firms. Firms that have independent boards that protect its shareholders’ rights and disclose its governance-related policies experience lower firm-level risk, other things being equal. Originality/value – This study is the first one to examine the impact of a composite measure of corporate governance quality on stock return variability in a non-US setting. The results suggest that firms can use specific corporate governance provisions to mitigate firm-level risk. The findings of the paper are therefore relevant and useful to corporate managers, investors, and policy makers.

Independent Directors' Tenure, Expropriation, Related Party Transactions, and Firm Value

2020 ◽  
pp. 182-207
Author(s):  
Chee Yoong Liew ◽  
S. Susela Devi
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Moderating Effect ◽  
Ownership Concentration ◽  
Independent Directors ◽  
Policy Makers ◽  
Related Party Transactions ◽  
Financial Valuation ◽  
Agency Conflict ◽  
The Relationship

This chapter analyses the relationship between related party transactions (RPT) and firm value and whether independent directors' tenure (IDT) strengthens or weakens this relationship. Further, it examines ownership concentration's role on this moderating effect of IDT in Malaysian family and non-family corporations. It is found that that IDT weakens the relationship between RPT and firm value. However, ownership concentration strengthens this moderating effect of IDT. Interestingly, family corporations are more likely to show a stronger impact of ownership concentration which we allude to concerns of maintaining reputation. The research results remain after controlling for technology corporations. The findings' have important implications for policy makers, practitioners and regulators, especially in emerging economies globally.Keywords: Agency Conflict, Corporate Financial Valuation, Independent Directors' Term in the Office, Corporate Governance, Family Corporations, Emerging Markets

Glass Ceiling and women employees in Asian organizations: a tri-decadal review

2017 ◽  
Vol 9 (3) ◽  
pp. 232-246 ◽  
Author(s):  
Remya Lathabhavan ◽  
Senthil Arasu Balasubramanian
Keyword(s):  
Glass Ceiling ◽  
Design Methodology ◽  
Social Implications ◽  
Asian Countries ◽  
International Organisations ◽  
Policy Makers ◽  
Content Type ◽  
Women Employees ◽  
Practical Implications ◽  
Shed Light

Purpose The purpose of the paper is to review and analyse different glass ceiling studies conducted in different Asian countries during the three decades after the introduction of the metaphor. It also describes the antecedents and the consequences of the glass ceiling. Design/methodology/approach The method chosen for the study was a computerised search of available materials using the keywords relating to glass ceiling in Asia and latest reports from international organisations. Findings The perception of glass ceiling existence in Asian countries has been sorted out region-wise. Different factors for glass ceiling have been categorised under different theories. Research limitations/implications The study includes a multiregional aspect of glass ceiling, which will be useful for further studies in this area. The limitation of the study is that it did not assess the awareness and influence of glass ceiling in each industry. Practical implications Since the study showed glass ceiling practices in different countries in Asia, it might help policy makers for making proper decisions for breaking of glass ceiling. Social implications The study may be a part of empowering women as it analyses areas of inequality and finds out antecedents. Originality/value This paper is the first to shed light on glass ceiling on a multicultural and multiregional aspect.

State ownership and firm value: simultaneous analyses approach

2020 ◽  
Vol 14 (1) ◽  
pp. 50-61
Author(s):  
Sami R.M. Musallam
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Design Methodology ◽  
Investment Decisions ◽  
State Ownership ◽  
Least Square ◽  
Continuous Measure ◽  
Content Type ◽  
Dummy Variable ◽  
Practical Implications

Purpose The purpose of this paper is to investigate the endogeneity effect of state ownership on firm value in Indonesia. Design/methodology/approach Using a sample of 139 Indonesian non-financial listed companies from 2009 to 2013, this study uses two-stage least square (2SLS) methods. Findings The results of 2SLS show that state ownership as “continuous measure, dummy variable and after adjusting the outliers” are negatively and significantly influenced firm value, implying that state ownership tends to lower firm value. Moreover, the results also show that U-shaped effect of state ownership with firm value, implying that the size of shareholders by state increases, firm value initially decreases and then increases. Practical implications The study intends to provide the shareholders, managers and investors with clear guidance before their investment decisions. Social implications This paper provides evidence that the agency costs may increase in firms with state ownership share. Originality/value This is the first paper contributes to the corporate governance literature by investigating the endogeneity effect between state ownership and firm value using 2SLS method in Indonesia.

Would integrating women's professional care of pelvic organ prolapse improve the symptoms and quality of life: an integrative literature review

2020 ◽  
Vol 28 (2) ◽  
pp. 119-133
Author(s):  
Nicola Davies ◽  
Teresa Burdett
Keyword(s):  
Quality Of Life ◽  
Pelvic Organ Prolapse ◽  
Conservative Treatment ◽  
Conservative Management ◽  
Integrated Approach ◽  
Pelvic Organ ◽  
Social Implications ◽  
Content Type ◽  
Practical Implications

PurposeIntegrated healthcare is a central tenant of the NHS Long Term Plan (NHS, 2019). NICE in 2019 published guidelines; advising the integration of multidisciplinary professionals which may lead to an improvement in conservative treatment methods of pelvic organ prolapse. Therefore, current literature on the conservative treatments for pelvic organ prolapse needs to be reviewed to ascertain if an integrated approach would improve the symptoms and quality of life for women.Design/methodology/approachA systematic review of the literature between 2013 and 2018 was implemented. Papers included were written in English, peer-reviewed and consisted of treatments of pelvic organ prolapse in women. Papers containing surgical interventions, postpartum participants, reviews, evaluations, guidelines, follow-up studies, focusing on cost effectiveness, sexual function were excluded.FindingsSeven studies in total were included, and two overarching themes were identified: quality of life after treatment and the effect of conservative treatment on pelvic organ prolapse symptoms. The literature suggested that integrating care had a more positive outcome on pelvic organ symptoms and quality of life.Research limitations/implicationsTo develop a robust enhanced model of care for conservative treatment of pelvic organ prolapse through more mixed method or qualitative research, that incorporates integrative treatment methods with collaboration from multidisciplinary professionals.Practical implicationsThe practical implications of integrating the conservative management of pelvic organ prolapse is the communication between the multidisciplinary team must be exceptional to ensure everyone understands and agrees the treatment that is being provided to patient. Also, effective teamwork is important to ensure the patient receives the best care with input from the correct disciplines. The multi-professional team will need to have regular meetings to discuss and implement care plans for patients that might prove difficult to schedule due to differing commitments and priorities. This must be overcome to insure a successful and effective integrated approach to pelvic organ prolapse is delivered.Social implicationsThe social implications of integrating the professional approach to women's care of pelvic organ prolapse involves reducing the severity of the symptoms therefore, increasing the quality of life. This may result in the reduction of surgical intervention due to the patient being satisfied with the conservative management. Through integrating the management of the prolapse the patient will receive an accessible individualised care plan pathway that focuses on treating or reducing the impact of the symptoms that are bothersome to the patient whilst managing patient expectations. Patients will also, be reassured by the number of multi-disciplinary professionals involved in their care.Originality/valueGlobal integration of conservative treatments and multidisciplinary-professionals specialising in pelvic organ prolapse and pelvic floor dysfunction is needed.

The drivers of corporate governance disclosure: the case of Nifty 500 Index

2018 ◽  
Vol 60 (2) ◽  
pp. 681-700 ◽  
Author(s):  
Androniki Katarachia ◽  
Electra Pitoska ◽  
Grigoris Giannarakis ◽  
Elpida Poutoglidou
Keyword(s):  
Corporate Governance ◽  
Financial Leverage ◽  
Policy Makers ◽  
Content Type ◽  
Explanatory Variables ◽  
Size Number ◽  
Governance Practices ◽  
Board Director ◽  
First Time ◽  
Governance Disclosure

Purpose Based on agency theory, the purpose of this paper is to investigate the determinants on the dissemination level of corporate governance disclosure (CGD). Design/methodology/approach The sample of the study incorporates listed companies in Nifty 500 Index for the period 2009-2014. The Governance Disclosure Score calculated by Bloomberg is used as a proxy for the dissemination level of corporate governance information. In total, eight explanatory variables are uses, namely, board’s size, number of board meetings, CEO duality, presence of women on the board, company’s size, financial performance, Tobin’s Q ratio and financial leverage. Findings The results of study suggest a need for improvement in CGDs by Indian companies, as they fail to comply the majority of the proposed disclosure items. Furthermore, it is revealed that the number of board director, the value of company, the financial leverage and the presence of women affect negatively the dissemination level of corporate governance information. While, the size of company is the only determinant that positively affects the extent of CGD. Practical implications The results are valuable because they reveal the attributes that determines which companies needs less or extra monitoring by shareholders and investors regarding the applied corporate governance practices. In addition, the study can be valuable to policy makers responsible for the regulation of company’s accountability in relation to corporate governance practices. Originality/value The study extents previous studies by incorporating for the first time Bloomberg’s rating approach regarding the dissemination level of CGD in Indian context.

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