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The paper deals with the limits of judicial review in related party transactions. It is discussed whether the so-called business judgment rule, which implies a backward shift in judicial scrutiny, applies. After pointing out the misunderstandings that are often incurred in the approach to the problem, the relationship between the quality of related party transaction procedures and the intensity of judicial scrutiny is examined. Building on this, the cost, in terms of vagueness, of the thesis that places the quality of the process and the intensity of judicial scrutiny in an inverse proportionality relationship is highlighted. Alternatively, it is suggested to apply the business judgment rule only in the case that transactions of greater significance with related shareholders are submitted to the shareholders’ meeting, with application of the so-called whitewash mechanism, even in the presence of a favorable opinion of the independent directors., Nello scritto si affronta la questione legata ai limiti del sindacato giudiziale sulle operazioni con parti correlate. In particolare, è discusso se si applichi la c.d. business judgement rule, che implica un arretramento dello scrutinio giudiziale. Dopo aver evidenziato gli equivoci in cui sovente si incorre nell’impostazione del problema, viene esaminato il rapporto fra qualità delle procedure in tema di operazioni con parti correlate e intensità del controllo dei giudici e si evidenzia il costo, in termini di indeterminatezza, della tesi che pone in rapporto di proporzionalità inversa qualità del processo e intensità del vaglio giudiziale. In alternativa si propone di subordinare l’applicazione della business judgement rule alla circostanza che le operazioni di maggiore rilevanza con soci correlati siano sottoposte all’assemblea con applicazione del meccanismo del c.d. whitewash, anche in presenza di parere favorevole degli amministratori indipendenti.

This study is to examine the effect of related party transactions on audit fees and suspect the effect of related party transactions tunneling to audit fees is greater than related party transactions propping. The research sample used 127 companies that are members of the manufacturing industry listed on the Indonesia Stock Exchange in 2020-2021 with 254 observations. The audit fee is measured using the natural logarithm of the audit fee which is disclosed in the annual report. Related party transactions are tunneling measured by the proportion of related party transactions of assets and expenses.Propping measured by the proportion of related party transactions liabilities and sales. The hypothesis was tested using the Panel Data Regression analysis model. This study found that related party transactions conducted by companies increase audit fees. The effect of related party transactions is tunneling to audit fees was found to be greater than related party transactions propping. these findings in line with agency theory which indicates that related party transactions can cause agency problems so that the auditor needs to increase audit efforts to overcome the risk of material misstatement that is related to related party transactions. Penelitian ini untuk menguji pengaruh transaksi pihak berelasi terhadap biaya audit dan menduga pengaruh transaksi pihak berelasi bersifat tunneling terhadap biaya audit lebih besar daripada transaksi pihak berelasi bersifat propping. Sampel penelitian menggunakan 127 perusahaan yang tergabung dalam industri manufaktur yang terdaftar di Bursa Efek Indonesia tahun 2020-2021 dengan 254 jumlah observasi. Biaya audit diukur menggunakan logaritma natural biaya audit yang diungkapkan dalam laporan tahunan. Transaksi pihak berelasi bersifat tunneling diukur dengan proporsi transaksi pihak berelasi aset dan beban. Propping diukur dengan proporsi transaksi pihak berelasi liabilitas dan penjualan. Hipotesis diuji menggunakan model analisis Regresi Data Panel. Studi ini menemukan bahwa transaksi pihak berelasi yang dilakukan perusahaan meningkatkan biaya audit. Pengaruh transaksi pihak berelasi bersifat tunneling terhadap biaya audit ditemukan lebih besar daripada transaksi pihak berelasi bersifat propping. Temuan ini sejalan dengan teori agensi yang menunjukkan bahwa transaksi pihak berelasi dapat menimbulkan masalah keagenan sehingga auditor perlu meningkatkan upaya audit untuk mengatasi risiko salah saji material yang bersifat dengan transaksi pihak berelasi.

This study aims to analyze the essential corporate governance determinants of related party transactions (RPTs) in Indonesia. Based on a hand-collected sample of three business groups of small, medium, and large-cap publicly listed firms on the Indonesia Stock Exchange (IDX) for 2013–2019, panel regression results find that foreign shareholders and firm size have a significant effect, at –2.402 and 0.248, respectively. The moderating model of audit quality shows that domestic shareholders, foreign shareholders, and firm size are significantly negatively associated, with –5.627 and –5.958 at 5%, respectively. Similar results show that foreign shareholders and independent commissioners significantly negatively affect related party transactions at –2.864 and –1.845, moderating the firm size at 10% and 5%, respectively. The moderation of regression results also indicates that audit quality and firm size tend to strengthen negative effects on the association between related party transactions and corporate governance. The moderation interaction confirms that audit quality will determine that domestic and foreign shareholders tend to increase the number of affiliate transactions. The interaction of complete information quality will force domestic and foreign shareholders to increase the role of affiliate transactions in creating firm value. The larger size of the firm, which is owned by foreign shareholders, will increase the intensity of cross-border related party transactions through the combined effects in the context of internationalization with a tendency of expropriation and transfer pricing practices, which can reduce government tax incomes. Acknowledgment We are grateful to the Ministry of Education, Culture, Research and Technology, Indonesia, for research grant No. 163/E4.1/AK.04.PT/2021, as well as the editor of the Investment Management and Financial Innovations journal, peer reviewers, and some colleagues for their suggestions, criticism and comments that significantly improved this paper.

Cataloged from PDF version of article. Thesis (Ph.D.): Bilkent University, Department of Law, İhsan Doğramacı Bilkent University, 2022. Includes bibliographical references (leaves 442-456). Bu çalışmanın temel amacı şirketler topluluğunda yer alan halka açık şirketlerin topluluk şirketleri ile ortak nakit ve hizmet kullanımına yönelik işlemlerinin sermaye piyasası mevzuatı açısından sınırlarının ve hukuki sonuçlarının tespit edilmesidir. Bu doğrultuda sermayenin oluşturulması ve mal varlığının korunması kuralları kapsamında ortak nakit kullanımı uygulamalarının sınırları, ilişkili taraf işlemlerine ilişkin düzenlemeler ve örtülü kazanç aktarımı yasağı çerçevesinde değerlendirilmiştir. İlaveten, şirketler topluluğunda maliyet tasarrufu sağlayan ve topluluğun ortak stratejiler çerçevesinde yönetilmesi bakımından gerekli olan ortak hizmetler nedeniyle yapılan ödemelerin tutarlarının belirlenmesine ilişkin esaslar örtülü kazanç aktarımı yasağı bağlamında ele alınmıştır. Son olarak, hukuka aykırılığa yol açan ortak nakit ve hizmet kullanımı uygulamalarına yönelik Sermaye Piyasası Kurulu’nun müdahale yetkileri ve şirketler topluluğunda hâkim şirketin bağlı şirketin kaybını denkleştirebilmesi olanağının halka açık şirketlerde uygulama alanı bulmasının hukuken hangi hâllerde gündeme gelebileceği irdelenmiş ve halka açık şirketlerin dâhil oldukları şirketler topluluklarında ortaya çıkan menfaat çatışmalarının dengelenmesine yönelik değerlendirme ve düzenleme önerilerinde bulunulmuştur. The main purpose of this study is to determine the legal limits and consequences of the shared use of cash and services within corporate groups for publicly held companies in relation to capital markets legislation. In this respect, the legal limits of transactions that enables sharing cash among group companies with respect to rules on formation and protection of capital of publicly held companies are reviewed within the context of related party transactions and cases that may result in disguised profit distribution are evaluated. Additionally, the use of shared services in corporate groups which provides significant savings and is necessary for developing common strategies is examined in order to determine which principles must be adhered to while charging for these services with regard to the ban on disguised profit distribution. Furthermore, Capital Markets Boards’ intervention powers regarding the shared use of cash and services which results in violation of the law are evaluated and the parent company’s opportunity of balancing the disadvantages of the subsidiary is assessed for publicly held companies. Finally, legislative amendments have been proposed in order to balance the conflicts of interest which arise when a publicly held company is part of a corporate group. by Rabia Sanem Üzeler Demirağ Ph.D.

The purpose of this paper is to analyze the impact of related party transactions (RPTs) on company performance using a panel data regression on 388 non-financial companies listed in Indonesia Stock Exchange during the 2015-2018 period. RPT variables used in this study are divided into several categories, namely transactions with related parties in the operational field (operational RPTs), financial field (financial RPTs), other fields (other RPTs), and total RPTs (sum of the three previous types). The study finds a significant negative relationship between financial RPTs and other RPTs on company performance. This finding is consistent with the precedent research that non-operational RPTs (i.e., financial RPTs and other RPTs) are commonly used by controlling shareholders as tunneling channels to expropriate minority shareholders. The results suggest policymakers to monitor more closely RPTs, particularly financial and other RPTs, that are more likely to be used as tunneling activities that are detrimental to firm performance. The results of this study are robust to various proxies of firm performance, providing additional empirical studies on RPTs in emerging countries with concentrated ownership structure, and shedding direct light on which type of RPTs that is mainly used as tunneling channel. Keywords: Efficient transaction hypothesis, firm performance, Indonesia, related party transactions, type II agency problem

The purpose of this paper is to investigate the effect of ESG performance on the possible association between related party transactions (RPTs) and different types of earnings management (EM). We study a sample of Italian non-financial listed firms over the 2014–2019 period, controlling for the fixed effects of the company’s sector of operation and the year. We investigate the effect of Environmental, Social and Governance (ESG) performance scores on the association between related party transactions and real earnings management (REM), as well as accrual-based earnings management (AEM). We provide evidence that firms might use RPTs in association with downward AEM or as a substitute of REM perpetrated by sales anticipations and discretionary expenses reductions, as well as an autonomous form of earnings manipulation. Our empirical evidence shows a significant moderating effect of ESG performance on earnings management. In particular, social as well as governance performance significantly moderate the association between RPTs and downward AEM; environmental performance moderates the possible use of RPTs in association with cashflow-based REM. This is the first study that analyzes the effect of ESG performance on the possible association between related party transactions and earnings management.

This research aimed to understand the important powers that affect Related Party Transactions (RPTs) decisions. It used the agency theory perspective to examine the effect of corporate mechanism, comprising variables of controlling ownership, the CEOs characteristics, and independent board of directors, on the decision of RPTs regarding potential conflicts of interest.A total of 310 financial reports of Turkish manufacturing listed companies in 2019 and 2020 were assessed. Subsequently, controlling shareholder and CEOs characteristics were discovered to play significant roles in the RPTs mechanism, while the independent board director variable had the highest impact.The strength of the independent board director effect on RPTs decision represents the function of corporate governance mechanisms. Although entrenchment effects occur in RPTs, the denial or approval of independent board directors was dependent on minority interest. It also highlighted the impact of alignment on RPTs’ decision, since the expropriation of ultimate power was balanced within the independent board director’s role., Bu araştırmanın amacı, ilişkili taraf işlemleri (RPT) kararlarında önemli etkileyen yetkileri anlamayı amaçlamıştır. Sahipliği kontrol eden değişkenler, CEO'ların özellikleri ve bağımsız yönetim kurulu değişkenlerini içeren kurumsal mekanizmanın, RPT'lerin potansiyel çıkar çatışmalarına ilişkin kararları üzerindeki etkisini incelemek için vekalet teorisi bakışı kullandı.2019 ve 2020 yıllarında Türk imalat şirketlerinin toplam 310 finansal raporu değerlendirildi. Daha sonra, kontrol eden hissedar ve CEO'ların özelliklerinin RPT'ler mekanizmasında önemli roller oynadığı keşfedilirken, bağımsız yönetim kurulu direktörü değişkeni en yüksek etkiye sahipti.Bağımsız yönetim kurulu direktörünün RPT kararları üzerindeki etkisinin gücü, kurumsal yönetim mekanizmalarının işlevini temsil eder. RPT'lerde sağlamlaştırma etkileri ortaya çıksa da, bağımsız yönetim kurulu yöneticilerinin reddi veya onayı azınlık payına bağlıydı. Nihai gücün kamulaştırılması, bağımsız yönetim kurulu direktörünün rolü içinde dengelendiğinden, aynı zamanda uyumun RPT'lerin kararı üzerindeki etkisini de vurguladı.

Esta pesquisa tem como objetivo identificar a influência das transações com partes relacionadas (TPRs) na comparabilidade das demonstrações financeiras e nos honorários de auditoria de empresas abertas do mercado brasileiro. Dois argumentos opostos se consolidaram na literatura em relação às TPRs: o primeiro sustenta que as transações relacionadas podem ser utilizadas por um grupo de empresas com o intuito de reduzir custos, compartilhar recursos e até obter ganhos; já o segundo argumento, sob a perspectiva da Teoria da Agência, enfatiza que essas transações podem se usadas oportunisticamente para expropriação de recursos das entidades. Partindo do pressuposto de que as TPRs podem surtir efeito na qualidade da informação contábil, num primeiro momento foi verificada a relação com a comparabilidade, na sequência, foi averiguado o seu efeito nos honorários de auditoria. Para tanto, foi adotada a premissa de que as TPRs podem reduzir a comparabilidade dos demonstrativos financeiros e em consequência aumentam os honorários dos auditores, pois a comparabilidade auxilia na melhoria da eficiência e da precisão de auditoria. O cálculo da medida de comparabilidade foi realizado por meio do método da similaridade da função contábil de DeFranco et al. (2011), os honorários de auditoria foram coletados do formulário de referência e mensurados mediante o logaritmo natural, em concordância com a pesquisa de Habib et al. (2015) e Al-Dhamari et al. (2018). No que tange às transações com partes relacionadas, foi adotado as TPRs ponderadas pelo ativo (Hasnan et al., 2016; Shin et al., 2019; Jalan et al., 2020) para investigar a relação com a comparabilidade. Por outro lado, optou-se por usar as TPRs em sua forma logaritma (Habib et al., 2015; Pratama, 2018; Ali et al., 2021) para verificar a relação com os honorários de auditoria. No que se refere à análise dos dados, para estabelecer a relação entre TPRs e comparabilidade adotou-se a análise multivariada da regressão quantílica, por meio dos quantis 0.25, 0.50 e 0.75 em que são analisados os níveis menor, médio e maior de comparabilidade; em se tratando de TPRs e honorários de auditoria, foram estimados por meio de dados em painel. Os resultados encontrados sugerem que as TPRs de vendas e totais impactam negativamente a qualidade das informações, pois reduzem a comparabilidade das empresas que dispõem de níveis médio e máximo de comparabilidade; ademais, as transações relacionadas de vendas, compras e totais são complexas e majoram o risco de distorção relevante, resultando em honorários mais elevados. Esta pesquisa contribui com a expansão da literatura, ao acrescentar evidências da relação de transações relacionadas e qualidade da informação contábil no contexto brasileiro. Além de trazer implicações para investidores, analistas e auditores, ao indicar que a comparabilidade é reduzida para empresas que já possuem comparabilidade média e máxima, prejudicando o processo de tomada de decisão e que as TPRs de vendas, compras e totais são um risco para o processo de auditoria, por isso, precisam se analisadas com maior precisão. Finalmente, os achados também fornecem alerta aos normatizadores quanto à proteção dos acionistas minoritários, visto que as transações relacionadas podem ser usadas para obscurecer as informações contábeis. This research has aims to identify the influence of related party transactions (RPTs) on the comparability of financial statements and audit fees of publicly traded companies in the Brazilian market. Two opposing argument have been consolidate in the literature in relation to RPTs: the first one maintains that related transactions can be used by a group of companies with the aim of reducing costs, sharing resources and even obtaining gain; the second argument, supported by the agency theory emphasizes that these transactions can be used opportunistically to expropriate resources from entites based on the assumption that RPTs can have effect on the quality of accounting information. To this end, the premise was adopted that RPTs can reduce the comparability of financial reports and subsequently increase auditors fees, as comparability helps to improve audit efficiency and accuracy. The cauculation of the comparability measure was performed using the method of similarity of the accounting function by DeFranco et al. (2021), audit fees were collected from the reference form and measured using the natural logarithm, in agreement with the research by Habib et al. (2015) and Al-Dhamari et al. (2018). Regarding transactions with related parties, asset weighted RPTs were adopted (Hasnan et al., 2016; Shin et al., 2019; Jalan et al., 2020) to investigate the relationship with comparability. On the other hand, we chose to use RPTs in their logarithm form (Habib et al., 2015; Pratama, 2018; Ali et al., 2021) to verify the relationship with audit fees. Regard to data analysis, to establish the relationship between RPTs and comparability, the multivariate analysis of quantile regression was adopted, using quantiles 0.25,0, 0.50 and 0.75, in which the lowest, medium and highest levels of comparability are analyzed; in terms of RPTs and audit fees, they were estimated using panel data. The results found suggest that purchase and total RPTs negatively impact the quality of information, as they reduce the comparability of companies that have medium and maximum levels of comparability; moreover, the related sales, purchases and totals transactions are complex and increase the risk of material misstatement, resulting in higher fees. This research contributes to the expansion of the literature, by adding evidence of the relationship between RPTs and the quality of accounting information in the Brazilian context. In addition to bringing complications for investors, analysts and auditors, by indicating that comparability is reduced for companies have average and maximum comparability, harming the decision making process and that sales, purchases and totals RPTs are a risk to the audit process, so they need to be analyzed more accurately. Finally, the findings also provide a warning to standard setters regarding the protection of minority shareholders, as related transactions can be used to obscure accounting information.

Целью исследования предстает проведение сравнительно-правового анализа института сделок, в которых имеется заинтересованность в законодательствах стран общего права. В статье проводится анализ правовых норм, регулирующих порядок совершения сделок с заинтересованностью., The purpose of the study is that currently there is an identification of offenses in connection with the presence of interest in the legislation of common law countries. The article describes the analysis of the legal norms governing the procedure for conducting a meeting with interest.

Related party transactions (RPT) are a common transaction conducted among companies and are the focus of the business world today. The purpose of this study is twofold, as follows: first, to provide empirical evidence for whether the RPT of related party loans in manufacturing companies in Indonesia is an opportunistic transaction or an efficient transaction, and second, to provide evidence for whether there are differences in company perspectives before and during the COVID-19 pandemic. This study employs data from all manufacturing companies listed on the Indonesia Stock Exchange (IDX). The data analysis techniques include descriptive statistical and hypothesis testing. The results of this study in the period 2018–2021 show that RPT has a positive effect on company value. During this period, that is, the years prior to the COVID-19 pandemic, RPT had a negative effect on company value. In contrast, the 2020–2021 period (during the COVID-19 pandemic) shows the opposite result: RPT has a positive effect on company value. The results of this study suggest that in the 2018–2021 and the pandemic period (2020–2021), companies conducted RPT for efficiency purposes, while prior to the pandemic (2018–2019) RPT was conducted for opportunistic purposes.

The purpose of this study is to investigate the effect of corporate governance mechanisms on the relationship between related party transactions and audit fees. In this study, board size and duality role of CEO were selected as corporate governance mechanisms and their effect on the relationship between related party transactions and audit fees among 93 companies listed on the Tehran Stock Exchange in the 10-year period of 2011-2020 were investigated. For this purpose, three hypotheses were formulated to investigate this issue and research regression models were tested using the panel data method with the fixed effects approach. The results showed that there is a positive and significant relationship between related party transactions and audit fees. The results also indicate that corporate governance mechanisms (board size, CEO duality) have a negative and significant effect on the relationship between related party transactions and audit fees. In fact, the results indicate that auditors are increasing their audit efforts (reflecting audit fees) to address the risk associated with related party transactions. It also minimizes conflicts of interest, opportunistic behaviors of managers and, consequently, the risk associated with related party transactions by applying appropriate regulatory mechanisms., {"references":["Abdul Rasheed, P., Iqbal Thonse, H., & Mallikarjunappa, T. (2021). Related party transactions and audit risk. Cogent Business & Management, 8(1), 1-17.","Aflatouni, A. (2014). Statistical analysis with Eviews in financial accounting research, financial management and economics (First ed.). Tehran: Termeh Publications.","Aharony, J., Wang, J., & Yuan, H. (2010). Tunneling as an incentive for earnings management during the IPO process in China. Journal of Accounting and Public Policy, 29(1), 1-26.","AICPA. (2001). AICPA Professional Standards. USA: American Institute of Certified Public Accountants.","Al-Gamrh, R. (2018). Related party transactions and audit fees: The role of the internal audit function. Journal of Management & Governance, 22(1), 187–212.","Ben Ali, C., & Lesage, C. (2012). Audit pricing and nature of controlling shareholders: Evidence from France. Journal of Accounting Research, 6(1), 21–34.","Carlacia, A., & Tudor, A. (2011). Related party transaction overview. Annales Universitais Series Oeconomica, 13(2), 248-241.","Chien, C., & Hsu, J. (2010). The role of corporate governance in related party transactions. Douliu, Taiwan: National Yunlin University of Science and Technology.","Habib, A., Jiang, H., & Zhou, D. (2015). Related party transactions and audit fees: Evidence from China. Journal of International Accounting Research, 14(1), 59-83.","Hajiha, Z., & Akhlaghi, H. (2015). The investigation of the board characteristics' effect on firm debt maturity structure. Management Accounting, 2(2), 49-64.","Hamidi, E., & Sheri, S. (2012). Identify motives of related party transactions. Empirical Research in Accounting, 2(2), 49-64.","Hope, O. K., Longhli, J., & Wayne, T. (2010). Agency conflicts and auditing in private firms. Accounting, Organizations and Society, 37(7), 500-517.","Matteo, P., & Marco, V. (2014). Related party transactions and financial performance is there a correlation? Empirical evidence from Italian listed companies. Open Journal Of Accounting, 3(1), 28-37.","Oktorina, M., & Wedari, L. K. (2015). An empirical investigation on ownership characteristics, activities of the audit committee, and audit fees in companies listed on Indonesia stock exchange. Applied Finance and Accounting, 1(1), 20-29.","Srinivasan, P. (2013). An analysis of related party transactions in India. India: Indian Institute of Management Bangalore."]}

The primary purpose of this study is to investigate the impacts of earnings management (EM) and related party transactions (RPTs) on corporate financial performance in an emerging market, Iran. This paper also aims to examine the moderating role of internal control weakness (ICW) in the relationship between them. The study sample includes 108 Iranian manufacturing companies listed on the Tehran Stock Exchange (TSE) between 2013 and 2018, and panel data with random effects are used to test the hypotheses. When an accounting-based measure called ROA is defined as a proxy for corporate performance, the results show that there is a negative association between real earnings management (REM) and corporate financial situation, while accrual-based earnings management (AEM) and firm value are correlated positively. However, when Tobin’s Q index is defined as a proxy for corporate performance, we do not find any significant association between them. Consistent with the tunneling hypothesis or agency theory, our findings confirm RPTs damage corporate value (ROA and Tobin’s Q) because managers probably consider it a mechanism to exploit enterprise resources owing to existing conflictual interests. Moreover, purchase-related party transactions lead to lower ROA, whereas sale-related party transactions and Tobin’s Q are correlated negatively. Moreover, weak internal control has a positive moderating influence on the linkage between AEM and Tobin’s Q index. Finally, we provide robust evidence that there is a positive association between sale growth and institutional owners with ROA and Tobin’s Q, although financial leverage and mergers and acquisitions (M&amp, A) have a destructive effect on corporate value.

This study aims to explore the financial and governance factors that determine related party transactions (RPTs) in the developing country context of Jordan. To do so, a multiple regression model was developed and used. Results show that RPTs are negatively related with CEO-duality and board independence, while they are positively related with firm leverage, ownership concentration, board size, and audit quality. However, no statistically significant relation was found between RPTs and firm profitability or board political connections. Several of these relations (or lack of relations) are contrary to the findings of extant studies from more-developed countries, and can arguably be attributed to the prevalence of the closely-held business model in Jordan, where, regardless of the firm's financial conditions, high ownership concentration and close relations among board and top executive management positions are common, and the demand for an audit service of high quality is limited. Practical implications of these findings include that regulatory authorities in Jordan should enhance regulations and corporate governance codes to protect small shareholders and other stakeholders and restrict the power of dominant shareholders that makes them able to engage in illegitimate RPTs. In doing so, it also has to improve its monitoring of companies more likely to engage in such RPTs.

This study investigates whether related party transactions (RPTs) are associated with corporate social responsibility (CSR). Analyzing Korean public companies, we find that firms with more RPTs show poor CSR performance, especially in terms of soundness and fairness. The results are only maintained in firms with low ownership of controlling shareholders, supporting the conflict-of-interest view related to RPTs. Furthermore, we find that RPTs of firms held low by controlling shareholders do not contribute to firm value. Our results indicate that the expropriation of profits or resources through RPTs negatively affects the CSR decision of affiliations, which acts as a deterrence to long-term growth. In emerging markets where RPTs within a business group are prevalent, a government needs to restrict RPTs which are beneficial only for controlling shareholders and to encourage CSR activities of affiliations with low controlling ownership.

İlişkili taraf işlemleri işletmelerde hem kurumlar arası hem de kurumlarla kişiler arası gerçekleştirilebilen işlemlerdir. Bu işlemler taraflar arasında mal ve hizmet satışı/alışı şeklinde gerçekleşebileceği gibi, borç alışverişi gibi farklı şekillerde de gerçekleşebilmektedir. Gerçekleşen bu tür işlemlerin muhasebe/finansal raporlama standartları uyarınca finansal raporların gerçeğe uygun olması bakımından açıklanması gerekmektedir. Açıklanan ilişkili taraf işlemleri nedeniyle firmanın değerinde olumlu ya da olumsuz etkilenme ihtimalinin olabileceği ifade edilebilir. Bu araştırmanın amacı ilişkili taraf işlemlerinin firma değerini etkileyip etkilemediğini tespit etmektir. Bu anlamda firma değerini etkileyen diğer değişkenlerle birlikte ilişkili taraf işlemlerinin firma değerini etkileyip etkilemediği BİST 100’de faaliyet gösteren 41 adet sanayi işletmesi üzerinde araştırılmıştır. Araştırma sonucunda ilişkili taraf işlemlerinin firma değerini araştırma kapsamında yer alan işletmeler bakımından etkilemediği tespit edilmiştir. Öte yandan piyasa değeri/defter değeri oranının ve öz sermaye karlılığının firma değerini pozitif yönde etkilediği tespit edilmiş, finansal kaldıracın firma değerinin negatif yönde etkilediği tespit edilmiştir., Related party transactions are transactions that can be carried out both between institutions and individuals with institutions. These transactions may take place between the parties in the form sale/purchase of goods and services or also may take place in the form of debt exchange. Such transactions are required to be disclosed in accordance with the accounting/financial reporting standards in terms of the accuracy of the financial reports. It can be stated that the the firm value may be affected positively or negatively due to the related party transactions disclosed.The purpose of the research is to determine whether the related party transactions affect or not the firm value. In this sense, it has been investigated on 41 industrial enterprises in BIST 100 whether the related party transactions with other variables that affect the firm value. As a result of this research, it has been determined that the related party transactions do not affect the firm value for 41 enterprises. On the other hand, it was determined that the market to book value ratio and return on equity ratio positively affect the firm value, and it was determined that the financial leverage has negative effect on the firm value.

Related Party Transactions (RPTs) are perceived as genuine transactions, which fulfill the economic needs of a company. However, the controlling shareholders may use RPTs as a tool for transferring the firm’s resources for their private benefit. The dual effect of RPTs, i.e., transaction efficiency and conflict of interest between the controlling shareholders and minority shareholders, increase audit risk and as a result, increases the audit fee. The Companies Act, 2013, and Clause 49 of the SEBI listing agreement mandate arm’s length principle of pricing of RPTs. However, there are situations in which the regulations are silent about the method of pricing, and this increases the risk of auditors for auditing RPTs. This study intends to examine the relationship between RPTs and audit risk in India, based on a sample of 1,182 firms covering a period from 31 March 2011 to 31 March 2018. Panel data methodology has been applied for empirical analysis and the results show that higher audit fee is an indication of resource transferring RPTs. The results prove that instead of reducing the complexity associated with RPTs, the new RPTs regulations increase audit fee as a result of the increases in audit risk.

In the context of concentrated structures, shareholders acquire power due to excess of control rights, compared to their cash flow rights (ownership). The difference between control and ownership is called deviation, common in pyramidal structures. In the pyramidal ownership, the controlling shareholder exercises control through at least one publicly traded company. The business ties established may facilitate the attainment of private benefits, through related party transactions, because the use of these transactions may generate conflicts of interest. Due to these aspects, this research aims to analyze the influence of the deviations of rights from the indirect structure in the related party transactions (RPTs) of companies with pyramidal structures in Brazil. The data were obtained on the Reference Form (document with a wide range of financial, operational, and non-operational information for the organization) for the period from 2010 to 2017, combining OLS panel data and quantile regressions. The deviation between control and ownership was calculated using two methodologies exposed in the literature. In characterizing RPTs, social networking techniques were used, demonstrating that financial transactions, such as interbank deposits and mutual contracts, predominate. In addition, some communities of companies were identified, which establish relationships based on a common controlling shareholder. As for the quantitative analysis, it was observed that the deviations of rights positively influence the total value of related party transactions. This influence was also observed for specific transactions between controlling and/or controlled companies. Regarding the analysis of the influence on the company’s performance and value, it was found that there is an inverse relationship between the value of transactions and performance, represented by the return on assets (ROA). For the firm's value, in most models, there was no statistical significance. Another pertinent contribution refers to corporate governance, which showed a positive relationship with the RPTs. In companies with a pyramidal structure, corporate governance did not exercise the role of moderation in expropriation channels. No contexto de estruturas concentradas, acionistas adquirem poder em função dos direitos de controle em excesso, comparados aos seus direitos de fluxo de caixa (propriedade). A diferença entre controle e propriedade é chamada de desvio, comum em estruturas piramidais. Na propriedade piramidal, o acionista controlador exerce controle através de, pelo menos, uma empresa listada publicamente. Os laços de negócios estabelecidos poderão facilitar a obtenção de benefícios privados, por meio de transações com partes relacionadas, pois a utilização dessas transações pode gerar conflitos de interesses. Devido a esses aspectos, a pesquisa visa analisar a influência dos desvios de direitos da estrutura indireta nas transações com partes relacionadas (TPRs) de empresas com estruturas piramidais no Brasil. Os dados para essas variáveis foram obtidos no Formulário de Referência (documentos com ampla gama de informações financeiras, operacionais e não operacionais da organização) para o período de 2010 a 2017, combinando análise de dados em painel OLS e regressão quantílica. O desvio entre controle e propriedade foi calculado por duas metodologias expostas na literatura. Na caracterização das TPRs, utilizaram-se técnicas de redes sociais, demonstrando que predominam transações de natureza financeira, tais como, depósitos interfinanceiros e contratos mútuos. Além disso, houve a identificação de algumas comunidades de empresas, as quais estabelecem relações a partir de um acionista controlador em comum. Quanto às análises quantitativas, observou-se que os desvios de direitos influenciam positivamente no valor total de transações com partes relacionadas. Essa influência também foi observada para as transações específicas entre empresas controladoras e/ou controladas. Quanto à análise da influência do desempenho e valor da firma, constatou-se que há uma relação inversa entre o valor das transações e o desempenho, representado pela rentabilidade do ativo (ROA). Já, para o valor da firma, na maioria dos modelos, não houve significância estatística. Outra contribuição pertinente se refere à governança corporativa, a qual apresentou relação positiva com as TPRs. Nas empresas com estrutura piramidal, a governança corporativa não exerceu o papel de moderação nos canais de expropriação, como as TPRs.

Regarding the development of sustainable governance systems, many regulators have issued and developed self‐regulatory codes defining the characteristics and ideal features of government models. The adoption of codes of good governance could serve as a mechanism to increase the level of legal protection for minority shareholders. Thus, this paper aims to measure the effective compliance by Italian listed companies with the Italian Code's recommendations on related party transactions and to assess the level of legal protection for minority shareholders in the Italian stock market. Using a quantitative method, our findings suggest that FTSE MIB companies are effectively compliant and that public utilities companies are as well. We also carried out an ordinary least squares (OLS) regression and found that companies with a higher market value and a greater presence of independent and non‐executive directors assure a higher level of compliance. We observed that widely held firms have a positive effect on the level of legal protection for the minority shareholders. Our paper contributes to enriching the sustainable governance models, and it is directed to academic and practical communities.

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Corporate social responsibility (CSR) encompasses activities through which a firm ultimately achieves sustainable management by improving the society and environment. Contrary to the general perception that CSR activities can improve only the enterprise value (EV), they can also be strategically deployed based on agency problems (situational factors). Specifically, by focusing on the nature of related party transactions that exhibit high tendencies to introduce agency problems, this study analyzes whether South Korean firms that engage in such transactions perform CSR activities more actively than those that do not. The empirical analysis reveals that firms that engage in related party transactions exhibit increased CSR activity scores, indicating that managers are more likely to deploy CSR activities as a tool for managing their image and concealing or embellishing illicit corporate transactions. Hence, CSR activities undertaken at the expense of shareholders may be opportunistically exploited as a tool for positively embellishing a firm’s image. However, it is observed that chaebol companies do not strategically exploit CSR activities, despite being engaged in related party transactions. Thus, chaebol companies that are registered with a large business group and under the supervision system of the government are unlikely to opportunistically exploit CSR activities.

The paper aims to investigate the effects of financial distress risk (FDR) and related party transactions (RPT) on financial reporting quality (FRQ) in an emerging market called Iran. In this study, the ordinary least squares regression (OLS) method is employed to test the hypotheses; moreover, Jones’ discretionary accruals model is used to assess the financial reporting quality (FRQ). The results show financially distressed companies have a lower financial reporting quality because they try to mislead other stakeholders about the corporate actual performance to attract more investors and lenders. Consistent with the “tunneling” or “conflict of interests transaction” assumption, our findings confirm there is a positive association between related party transactions through loan and accrual-based profit management. In other words, Iranian managers participate in loan-related party transactions to expropriate their firm’s resources and then manipulate financial statements to mask such expropriation. Finally, additional analysis indicates that financial reporting quality is seen well among firms having higher sale growth and more institutional owners, whereas the variables of ROA and financial leverage negatively affect financial information quality.

Related party transaction is one of the factors devaluating the capital market. Although all related party transactions aren’t opportunistic, but it is believed that they significantly affect risk and are very important to investors. This research is aimed to identify the relation of related party transactions to disclosure quality, earning management, and profitability. Based on the representation problem, related party transactions, due to the owner's lack of control and the conflict of interest, can lower disclosure quality and stakeholders’ wealth and thus result in earning management. Therefore this study uses related party transactions as an independent variable and discretionary accruals as the dependant variable. The sample includes 112 firms listed in Tehran Stock Exchange over the period from 2012 to 2016. To test the hypotheses, multiple linear regression model has been used. Research findings show a negative significant relation, a positive significant relation and no significant relation of related party transactions to disclosure quality, earnings management and profitability, respectively.

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.

This paper analizes how ordinary course of business transactions regulation affects the effectivityof the related party transactions law, for which the foundations and problems of ordinary courseof business transactions are doctrinally analized, and self-regulation of IPSA corporations areempirically checked, by the comparison of procedimental and substantive aspects contained in ordinarytransactions policies produced by those corporations. It is observed that chilean corporations arereluctant to self-regulate, which increments the risk of tunneling and, also, it is concluded thatthere is ample scope for improvements in regulation, without turning it excessively burdensome., Este trabajo analiza cómo la regulación de las operaciones habituales afecta la eficacia de lanormativa respecto de operaciones entre partes relacionadas, para ello se analizan dogmáticamentelos fundamentos y problemas de la regulación de operaciones habituales y se revisa empíricamentecómo se autorregulan las sociedades del IPSA, mediante la comparación de aspectos de procedimientoy sustantivos contenidos en las políticas de habitualidad producidas por las propias sociedades.Se observa que las sociedades revisadas son reacias a autorregularse, lo que incrementa el riesgode tunneling y, además, se concluye que existe un amplio espacio para mejoras en la regulación,sin volverla excesivamente gravosa.

International audience; Despite of a lack of of consensus on the usefulness of the disclosed amounts of transactions with related parties in the notes to financial statements, this empirical study investigates the informational relevance of declared amounts in accordance with IAS 24 for a sample of French publically-traded firms over the period 2008-2014. The empirical findings indicate that the amounts of several categories of transactions (commercial, cash, guarantees), are informative and useful for market participants in such a sense they are significantly correlated with share prices and stock return movements. Furthermore, our research contributes to the debates of accounting standard-setters on the desirability of harmonizing regulations on related party transactions and demonstrate the value relevance of these publications. Finally, our results exhibit that, as hypothesized, detailed information about related-party transactions allows us to disentangle their respective informative values.

Direct experience of a peer’s punishment might make non-punished peers reassess the probability and consequences of facing punishment and hence induce a change in their behavior. We test this mechanism in a setting, China, in which we observe the reactions to the same peer’s punishment by listed firms with different incentives to react - state-owned enterprises (SOEs) and non-SOEs. After observing peers punished for wrongdoing in loan guarantees to related parties, SOEs - which are less disciplined by traditional governance mechanisms than non-SOEs - cut their loan guarantees. SOEs whose CEOs have stronger career concerns react more than other SOEs to the same punishment events, a result that systematic differences between SOEs and non-SOEs cannot drive. SOEs react more to events with higher press coverage even if information about all events is publicly available. After peers' punishments, SOEs also increase their board independence, reduce inefficient investment, increase total factor productivity, and experience positive cumulative abnormal returns. The bank debt and investment of related parties that benefited from tunneling drop after listed peers’ punishments. Strategic punishments could be a cost-effective governance mechanism when other forms of governance are ineffective.

Companies restate when material misstatements are identified in previously issued financial statements. Misstatement research in Latin America is sparse, even though they are an important context to study this phenomenon. Chile&rsquo, s corporate governance regulations are considered exemplars for Latin American countries but its auditing profession is not well developed. Thus, Chile provides an interesting context to study the complementary roles of audit and board governance affecting misstatements. Using a sample of 104 Chilean listed firms over seven years, our study finds that the board links and audit partner tenure negatively affect misstatements. Specifically, given the prevalence of related party transactions (RPTs) in conglomerates, the finding suggests that cross directors monitor high-value RPTs, but that this is not a substitute for auditor expertise. The findings raise questions about the advisability of mandating audit partner rotation to strengthen auditor independence because the results indicate that a short audit partner tenure leads to the auditor not developing client-specific knowledge. The study makes contributions to the corporate governance literature by highlighting that board monitoring is not a good substitute for auditor monitoring of financial reporting integrity, and suggesting the need for having licensing requirements to become an auditor.

This research examines the relation between complex ownership structure in subsidiary firms and related party transactions. Control-ownership disparity is used as a proxy for complex ownership structure in business group companies and subsidiary financial statements information in terms of operating and non-operating is applied to measure related party transactions. So, data from 15 group companies listed in Tehran stock exchange and their subsidiaries during 2010 to 2014 are collected and tested (494 firm-years). The research method is archival. Regression analysis (OLS) –pooled data (unbalance panel) is used to examine hypotheses. The results reveal that complex ownership structure in subsidiaries affects operating and non-operating related party transactions, although this effect decreases along the time. In addition, the relationship between complex ownership structure and non- operating related party transactions is affected by group size; it means the larger the size, the more use of the complex ownership structure to deal non-operating related party transactions.

This study aims to examine if the firms in business groups avoid tax by related party transactions. If other conditions are the same, firms have an incentive to maximize after-tax profits by minimizing tax burden. If the firms are in business groups, they tend to minimize tax at the business group level. It is expected that the level of tax avoidance of both parties of related party transactions will be high if tax is minimized at the business group level as the transactions will be made at a level that can minimize the tax of both the firm that reduces the taxable income through related party transactions and the firm whose taxable income increases. In addition, the effect of being in a Chaebol business group and the effect of the Unfair Related Party Transactions Tax Law on the association with related party transactions and tax avoidance are also examined. According to this study, the firms in business groups avoid tax by related party transactions. It is also found out that tax avoidance by related party transactions is done more aggressively in Chaebol member firms than non-Chaebol firms, while tax avoidance by related party transactions in Chaebol business groups decreases after the implementation of the Unfair Related Party Transactions Tax Law.

Germany Inc. was an idiosyncratic form of industrial organization that put financial institutions at the center. This paper argues that the consumption of private benefits in related party transactions by these key agents can be understood as a compensation for their coordinating and monitoring function in Germany Inc. As a consequence, legal tools apt to curb tunneling remained weak in Germany from the perspective of outside shareholders. While banks were in a position to use their firm-level knowledge and influence to limit rent-seeking by other related parties, their own behavior was not subject to meaningful controls. With the dismantling of Germany Inc. banks seized their monitoring function and left an unprecedented void with regard to related party transactions. Hence, a "traditionalist" stance which opposes law reform for related party transactions in Germany negatively affects capital market development, growth opportunities and ultimately social welfare.

In the presence of business groups, the expropriation through related party transactions (RPTs) is common and costly to minority shareholders. At the same time, it is well recognized that RPTs can help firms overcome market shortcomings. Using the setting of India's RPT voting rule, I find that a mandatory and binding shareholder voting mechanism helps filter out expropriation. Minority shareholders actively raise their voice against RPT resolutions, resulting in substantial shareholder dissent. My difference-in-difference analysis reveals that shareholder voting has a significant deterrence effect on RPT volume, especially on financial RPTs. I also find that stock prices react positively to news signaling the passage of the voting rule, and that the association between firm profitability and RPT increases following rule's adoption, suggesting that rule has a positive effect on shareholder value. Lastly, I show that mandatory RPT voting makes Indian firms more attractive to foreign institutional investors.

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. The concept of expropriation in this study is measured by related party transaction assets, liabilities (RPT AL) and related party transaction sales, expenses (RPT SE). 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, especially the problem of information asymmetry, which can be minimized by the role of corporate governance., Penelitian ini bertujuan untuk menganalisis pengaruh kepemilikan perusahaan berpola pyramid of structure, dan tingkat pengungkapan transaksi pihak berelasi terhadap tindakan ekspropriasi, dengan tata kelola perusahaan sebagai variabel pemoderasi. Konsep ekspropriasi dalam penelitian ini diukur dengan besaran related party transaction asset, liabilities (RPT AL) dan related party transaction sales, expenses (RPT SE). Teknik analisis regresi berjenjang digunakan untuk menguji hipotesis yang dikembangkan dalam penelitian ini. Populasipenelitian adalah perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia (BEI) selama tahun 2014-2016, dan pengambilan sampel menggunakan teknik purposive sampling. Hasil penelitian gagal membuktikan pengaruh kepemilikan perusahaan berpola pyramid of structure, dan pengungkapan transaksi pihak berelasi terhadap tindakan ekspropriasi. Lebih lanjut, penelitian ini membuktikan bahwa peran tata kelola perusahaan dapat meningkatkan tingkat pengungkapan transaksi pihak berelasi, namun belum mampu mengurangi tindakan ekspropriasi yang disebabkan karena adanya kepemilikan pyramid of structure. Penelitian ini berkontribusi pada teori agensi tipe II yang menjelaskan konflik kepentingan antara pemegang saham pengendali dan non-pengendali khususnya masalah ketidak asimetrian informasi, yang dapat diminimalisasi dengan peran tata kelola perusahan.

В статье автором анализируются некоторые положения Федерального закона от 03.07.2016 № 343-ФЗ «О внесении изменений в Федеральный закон “Об акционерных обществах” и Федеральный закон “Об обществах с ограниченной ответственностью”», вступившего в силу с 1 января 2017 г. В результате проведенного анализа формулируются имеющиеся проблемы и предлагаются пути их решения., In her article the author analyzes some provisions of the Federal law from 07/03/2016 № 343-FZ «About introduction of amendments to the Federal law «About Joint-stock Companies» and the Federal law «About Limited Liability Companies», that has come into effect since 01/01/2017. Upon analysis, she states the existing problems and offers the ways of their elimination., №9 (2017)

We study the dynamic causal effects of the shareholding ratio of controlling shareholder on tunneling behavior in China. We use control-right-transfers as the event to conduct the study. We obtain 394 control-right-transfer samples in China corporate control market from 2001 to 2008. We use related party transactions amount to capture control shareholders’ tunneling activities, and make the following findings. Firstly, tunneling behavior is significantly affected by the shareholding ratio of controlling shareholder. Secondly, the relationship between tunneling and shareholding ratio of controlling shareholder takes an N shape (incline-decline-incline). There are at least two turning points in the relationship. Furthermore, firms with shareholding ratios of controlling shareholder that range from 34.46% to 39.01% (8.99–18.04%) exhibit the most (least) severe tunneling. Firm size is significantly positively related to tunneling activities. In addition, the shareholding ratios of the board and the tunneling activities are significantly negatively correlated. These findings imply the shareholding ratio decision of controlling shareholder in control transfers lead to agency problems manifested in China in a particular form of tunneling.

The primary objective of this thesis is to examine the impact of regulation change on earnings quality. This work is organized into two distinct chapters. The first chapter examines the impact of auditor appointment regulation change on the earnings quality. This study examines the impact of regulation change with respect to auditor appointment on banks’ earnings quality in India. Since top management makes all decisions related to auditor appointment, it creates an economic bond between top management and auditors which could impair auditor independence. Effectively the appointment of auditors is controlled by the same entity whose decisions they are supposed to evaluate and audit. Prior research argues that such an arrangement allows management greater discretion in reporting their earnings. In recent times, the Indian government over certain periods has allowed public sector banks to appoint their own auditors, and over certain periods the government has appointed auditors on the bank’s behalf. This context creates a natural experiment where the economic bond between top management and auditors is weakened or strengthened. This allows us to perform a comparative analysis to examine if the vesting of auditor appointment authority in the top management results in greater discretion on the reported earnings. The results of our analysis indicate that autonomy in bank auditor appointment results in greater earnings management. More specifically we argue that auditor’s oversight capabilities are negatively impacted by the existence of an economic bond stemming from their appointment by top management. The second chapter examines the impact of Related Party Transactions (RPT) on earnings quality and the subsequent market reactions. Prior research indicates that RPT tends to adversely impact shareholders’ interests (Gordon & Henry, 2005) particularly by tunnelling profits to controlling shareholders (Lo & Wong, 2011), thus destroying firm value (Kang et al., 2014; Kohlbeck & Mayhew, 2010). In India, the magnitude of RPT has been increasing over time, and as a result, new regulations have been introduced for RPT approvals. These new regulations involve getting approval for RPTs from the shareholders as well as the board of directors and audit committee. This study finds that the mere presence of RPTs is not essentially an indication that a firm is likely to engage in greater earnings management, which is in contrast to theoretical arguments proposed in Aharony et al. (2010). However, more importantly, the results indicate that markets respond positively to the RPT related regulation change which requires greater scrutiny from the stakeholders of the company. The study also supports the above arguments using an experimental design and observes that the recent change in RPT approval regulation improves investor perceptions of firms engaging in RPTs.

The objective of this study is to investigate the relationship between related party transactions (RPT) and earnings management. This study argues there is a different influence between RPT a priori likely to result in expropriation and RPT a priori not likely to result in expropriation. RPT a priori likely to result in expropriation creates an incentive to management or controlling shareholder to overstate income to cover or mask their expropriation. This study uses non-absolute discretionary accruals based on Kazsnik model to proxy earnings management. Corporate governance mechanism should reduce the incentive to overstate income in a company that involves in RPT a priori likely to result in expropriation. The results of this study show that the earnings management (income increasing) is affected by the existence of RPT a priori likely to result in expropriation and corporate governance mechanism, but it is not affected by the size/value of the transactions. As expected, companies involving in RPT a priori likely to result in expropriation with weak corporate governance mechanism, tend to manage earnings that increase income. We find that strong corporate governance mechanism decreases the discretionary accruals in companies which have RPT a priori likely to result in expropriation. DOI : https://doi.org/10.21632/irjbs.7.1.1-12 Keywords: Related Party Transactions, Earnings Management, Discretionary Accruals, Corporate Governance

This study uses data from companies listed on the TehranStock Exchange to investigate whether related party transactions areassociated with earnings management. According to the agency theorybecause of the separation of ownership from control, conflict ofinterest may arise, so if a firm`s executives and/or board membersengage in related party transactions to expropriate the firm`sresources, then they have incentives to manage earnings to mask suchexpropriation. The research uses the related party transactions as theindependent variable and discretionary accruals as the dependentvariable. The sample of study includes 145 companies from 2008 to2012. The panel data and multiple linear regressions are used toexamine the hypothesis. The results of this study reveal that there is asignificant positive relationship between the related party transactionsand earnings management.

Related party transactions (RPTs) can have a dual nature. On one hand, these transactions may be considered sound business exchanges, fulfilling the economic needs of the company. On the other hand, RPTs may be considered a mechanism to exploit company resources as a consequence of existing conflicting interests. This study takes into account both aspects. Specifically, this paper investigates the relation between RPTs and companies’ financial performance, and thus verifies whether there is an association between these kinds of transactions and earnings management. This study examines the existence of this relation as regards the universe of Italian listed companies for the period of 2008-2011. According to the related data analysis, the research concludes that related party transactions and companies’ financial performance results are not correlated and that there is no evidence of a cause-effect relation. Therefore, related party transactions do not appear—thanks also to the existence of control mechanisms—a means used by Italian listed companies to realize earnings management, especially earnings smoothing.

This study investigates the extent and the determinants of tunnelling behaviour in five ASEAN countries (i.e. Indonesia, Malaysia, Philippines, Singapore, and Thailand). Related party transactions (RPTs) in the form of loans to related parties are used as the proxy for tunnelling. With 200 firm-year observations over the period 2006-2009, this study finds a positive association between managerial ownership and the extent of tunnelling. The other important findings are that business environment (BE), foreign ownership, and independent directors are ineffective governance mechanisms to rein in tunnelling behaviour. This suggests that regulators need to evolve more effective governance mechanisms.

The present study examines the value relevance of disclosed related party transactions (RPTs) in group of companies at the Greek food-beverage sector. We are based on two types of transactions, exchange of goods- products and exchange of assets, using a value relevance approach. We apply the model of Ohlson for the period 2003-2012 and we observe that the reported earnings of firms selling goods or assets to related parties exhibit a lower valuation coefficient than those of firms in Greece without such transactions. This result is not observed after 2005, when a new fair value measurement rule for related party transactions came into effect. Our evidence suggests that the new RPT regulation in Greece is perceived to be effective at reducing the potential misuse of RPTs for earnings management purposes. Since RPTs have been the subject of numerous scandals, our evidence from the Greek stock markets suggests that new RPT accounting standards could prove an effective solution to this issue.

In this article, motives of Related Party Transactions are examined based on the model provided by Moscariello (2010). Previous literature has developed two contrasting theories, conflict of interests vs. efficient transactions hypothesis, to describe the reasons behind RPTs. However, the empirical evidence collected so far does not offer a unique answer, lacking to show a definite picture about the nature of similar transactions. If there is opportunistic behavior, there should be special relations between the amount of RPTs with ownership concentration level, market value to book value ratio, board size, percentage of nonexecutive board managers, Duality, and leverage. Research is performed over the years of 2006 to 2010 among Tehran Stock Exchange (TSE) listed companies. Test of hypothesis shows that there are significant expected relations between ownership concentration level, percentage of nonexecutive board managers, and leverage with the amount of RPTs. The empirical analysis, supported by the development of the theoretical model, points out the existence of an opportunistic behavior by the controlling shareholders.

Previous studies have shown that product market competition has an important effect on corporate strategies and internal governance mechanisms. Using a sample of China’s listed firms from 2004 to 2009, we explore the relationship between product market competition and normal related party transactions and find a significant positive relationship. In addition, we investigate the substitutive effect of product market competition and the cash flow rights owned by ultimate controlling shareholders on the extent of normal related party transactions. In particular, our results suggest a positive relationship between the ultimate controlling shareholders’ cash flow rights and normal related party transactions that is strongest in noncompetitive industries and weakens as product market competition increases.

This study was conducted on the related party transaction and earnings management. Agency theory provides that managers may engage into self-enrichment transactions to maximize their benefits at the detriment of the shareholders of the firm. Though, management or concentrated ownership was suggested as the possible solution to this problem, this form of ownership structure has its peculiar problems which are termed as type II agency problem. Controlling shareholders are found to be using their voting power to extract extra benefits from the firm through the insider information and in many instances engage in detrimental related party transactions at the expense of minority shareholders. This study have identified how and why controlling shareholders or managers use related party transaction as a means to perpetrate accrual-based or real activity earnings management. It was recommended that empirical study be conducted to investigate whether disclosure regulation can constrain the controlling shareholders or management against the use of real-activity management through related party transaction.

The World Bank’s Doing Business Report (DBR) ranks every year numerous jurisdictions across the globe according to their ability to facilitate business activities. Among the indexes contributing to the definition of the global competitiveness of the legislations, the “Protecting investors index” (PII) measures the protection of minority shareholders in listed companies. In this paper, we analyse the DBR’s assessment of the Italian regulatory framework on investor protection. We find that the PII falls short of properly evaluating the applicable rules. First, it underrates Italy because the DBR evaluation falls short of properly evaluating the role performed by independent directors under Italian rules on related party transactions. In particular, the DBR fails to properly account for independent directors’ power to veto unfair transactions before they are submitted to the board, a safeguard that ensures minority investors’ protection at least as well as mandatory abstention by conflicted directors. Second, past DBR overrated the PII, so that subsequent reforms that substantially improved investor protection have not been grasped by more recent assessments, giving the misleading impression that no relevant changes have occurred. Far from representing one of the multiple coding errors reported in the literature, these flaws aptly show that the DBR methodology, while correctly attempting to preserve consistency in the evaluation of different jurisdictions, adopts an excessively formalistic approach and disregards the function of the rules it scrutinizes. In light of the influence that the DBR exerts on national policymakers, this approach is detrimental because it might induce window-dressing reforms. Moreover, it may rule out experimentation, which is key to ensuring that the applicable rules keep pace with the variety of techniques adopted to expropriate minority shareholders., University of Bologna Law Review, Vol 1, No 1 (2016)

Dünya ticaret hacmindeki büyüme sayesinde daha geniş alanlara yayılan sermaye, küreselleşme ile birlikte çok uluslu şirketlerin ekonomide daha etkin rol almasına sebep olmuştur. Birden fazla ülkenin vergi kanunlarına tabi olan bu şirketler, çeşitli yollarla kâr aktarımı suretiyle matrahlarını aşındırma eğilimine girmişlerdir. Bu yollardan biri olan transfer fiyatlandırması yoluyla örtülü kazanç dağıtımı olgusu tez çalışmasının temelini oluşturmaktadır. Özellikle son yıllarda OECD (Organisation For Economic Co-Operation And Development) desteği ile birlikte birçok ülkede olduğu gibi ülkemizde de transfer fiyatlandırması alanında çalışmalar artmıştır. Bu kapsamda, 5520 sayılı Kurumlar Vergisi Kanunu'nun `Transfer Fiyatlandırması Yoluyla Örtülü Kazanç Dağıtımı` başlığını taşıyan 13.maddesi başta olmak üzere çeşitli düzenlemeler aracılığıyla kanunda ilişkili sayılan kişilerle, emsallere uygunluk ilkesine aykırı tutarlar üzerinden yapılan işlemler sonucu vergi gelirlerinde ortaya çıkacak olası kaybın önüne geçilmesi amaçlanmıştır. Gerek ilişkili kişi sınırı, gerekse ilişkili kişi işlemlerinde kullanılacak fiyatların ne olması gerektiği kanunlar tarafından açıklanmış ve mükelleflerin bu konuda bilinçlenmesi sağlanmıştır. Bu çalışmada, transfer fiyatlandırması uygulamaları bakımından ilişkili kişi olgusu, tüm boyutlarıyla incelenmiş ve yapılan işlemler örnekler üzerinden açıklanmıştır. Ayrıca ülkemizdeki mevcut düzenlemelerin uluslararası alanda dayandığı temellere değinilerek geçtiğimiz aylarda yürürlüğe giren 6728 sayılı Yatırım Ortamının İyileştirilmesi Amacıyla Bazı Kanunlarda Değişiklik Yapılmasına Dair Kanun'un ilişkili kişi sınırına olan etkisi açıklanmıştır. Anahtar Kelimeler: transfer fiyatlandırması, ilişkili kişi, örtülü kazanç dağıtımı, emsallere uygunluk ilkesi, kâr aktarımı, matrah aşındırma. Accumulation of capital, which has spread to wider regions due to the growth in world trade volume, has resulted in more active roles played by international companies in the economy together with globalization. These companies, which are subject to tax laws in more than one countries, tend to erode their tax bases by means of profit shifting through various ways. This study is based upon one of these ways, distribution of disguised profit through transfer pricing. Studies on transfer pricing become prevalent also in Turkey, as it has in other countries, especially with the recent support of OECD (Organisation for Economic Co-Operation and Development). Within this context, it is intended to prevent the possible erosion that will arise in tax incomes due to performing the transactions with related parties against arm's length principle through various arrangements, especially with article 13 of Corporate Tax Law No. 5520, describing `Disguised Profit Distribution via Transfer Pricing`. In addition to the limitation of related party, prices that should be used in related party transactions are defined in detail by the laws and it is aimed to raise awareness of tax payers. In this study, related party concept within the context of transfer pricing has been analysed thoroughly and the transactions were explained by examples. Moreover, the international bases of the current regulations in our country were explained and the effect of recently issued Law No. 6728 describing Amendment of Certain Laws for the Improvement of the Investment Landscape on the limitation of related party has been discussed. Keywords: transfer pricing, related party, distribution of disguised profit, arm's length principle, profit shifting, tax base erosion. 170

Worldwide there are a lot of controversies and debates between the tax authorities and the MNC's about the related party transaction pricing. The tax authorities contest on the grounds that non arm's length price is depriving them of rightful revenue and that the MNC's are doing this to save on tax liability. This is not the case always. It is one of the considerations in the related party transfer pricing. The study tries to find the objectives behind the pricing strategy by the MNC's. Through extensive literature survey the study finds that the tax liability management is not the only objective that the MNC's have while pricing the related party transactions but there are other objectives that have priority in the global strategy of the MNC's which also play a vital role in pricing strategy. The global objectives demand movement of funds from one location to other for various purposes for which non arm's length pricing is used. The study finds that non tax outlook in transfer pricing is very strong and in some cases compelling to affect the transfer pricing strategy. The study finds various purposes other than tax liability management which the MNC's have to attend to while deciding their related party pricing strategy.

Örtülü kazanç aktarımına ilişkin olarak Türk hukukundaki temel düzenlemeleri 6362 sayılı Sermaye Piyasası Kanunu ve 5520 sayılı Kurumlar Vergisi Kanunu'nda yer alan hükümler oluşturmaktadır. Örtülü kazanç aktarımı sermaye piyasası hukukuna kurumlar vergisi hukukundan geçmiş bir müessesedir. Konu kurumlar vergisi hukuku açısından birçok yargı kararı ve çalışma tarafından değerlendirilmiş olmasına karşın, aynısının sermaye piyasası hukuku düzenlemesi açısından söylenmesi mümkün olamamaktadır. Bu durum konunun sermaye piyasası hukuku açısından değerlendirilmesinin yapılmasında kurumlar vergisi hukukundan faydalanılması zorunluluğunu doğurmaktadır. Nitekim çalışmada örtülü kazanç aktarımı iki kanun açısından karşılaştırılarak değerlendirilmiş, değerlendirmeler bu düzenlemelerin kesişiminde yer alan en önemli hukuki yapıyı oluşturan halka açık anonim şirketler üzerinden yapılmıştır.Halka açık anonim şirketlerin çok sayıda kişinin menfaatini ilgilendiren yapılar olması, bu şirketlerin konu olduğu örtülü kazanç aktarımı faaliyetlerinin çok sayıda kişinin menfaatini etkiliyor olması sonucunu da beraberinde getirmektedir. Türkiye'de halka açık anonim şirketlerin sayısının ve bunlara yatırılan maddi kaynakların miktarının her geçen sene artıyor olması, örtülü kazanç aktarımının ilerleyen dönemde iki kanun açısından da sıkça gündeme gelmesi olasılığını ve dolayısıyla bu çalışmanın önemini artırmaktadır.Bir faaliyetin örtülü kazanç aktarımı niteliğinde olup olmadığının tespitinde esas olarak `işlem` ve `ilişkili kişi` unsurları belirleyici olmaktadır. Örtülü kazanç aktarımının gerek sermaye piyasası hukuku gerekse kurumlar vergisi hukuku açısından `işlem` ve `ilişkili kişi` unsurları yönünden benzerlikler taşıması, bir kanun açısından örtülü kazanç aktarımı niteliğinde olan bir faaliyetin öteki kanun açısından da örtülü kazanç aktarımı sayılması sonucunu doğurabilmektedir. Çalışmada `işlem` ve `ilişkili kişi` unsurları iki kanun açısından karşılaştırılarak incelenmiş, farkları ve kesişimleri üzerine değerlendirmeler yapılmıştır.Anahtar Kelimeler (Türkçe) 1) Örtülü Kazanç Aktarımı2) Halka Açık Anonim Şirket 3) İşlem 3) Transaction4) İlişkili Kişi 5) Sermaye Piyasası Hukuku In Turkish law there are two main regulations on `concealed distribution of capital`; one is in 6362 numbered Capital Markets Law and the other one is in 5520 numbered Corporate Tax Law. Concealed distribution of capital regulation is a subject that is transferred from the corporate tax law system to the capital markets law system. Although there are many court decisions and academic studies on the corporate tax law's concealed distribution of capital regulation, it is not possible to state the same for the capital markets law regulation. This eventually makes it necessary to use a comparative method and to evaluate the capital markets law regulation by comparing it with the corporate tax law regulation. In this study, concealed distribution of capital subject is examined by comparing both laws' regulations and by focusing on publicly-held joint stock corporations as these are the most important legal structures that are in the scope of both regulations.As many people have interests connected with publicly- held joint stock corporations, activities of concealed distribution of capital which are carried out via these corporations affects many people. In Turkey, the number of publicly-held corporations and the money invested in these are increasing every year. Therefore, it is possible to say that the number of concealed distribution of capital activities will increase and thus the importance of this study will also increase in the near future.`Transaction` and `associated persons` terms are the main determinants that determine if an activity is a concealed distribution of capital or not. As concealed distribution of capital regulations which are in capital markets law and corporate tax law have similarities, an activity that can be stated as a concealed distribution of capital sometimes can also be stated as a concealed distribution of capital for the other law. In this study, `transaction` and `associated persons` terms are evaluated from both laws' aspects by comparing and evaluations are carried out on the similarities and intersections of these laws.Anahtar Kelimeler (İngilizce)1) Concealed Distribution of Capital2) Publicly- Held Joint Stock Corporation3) Transaction4) Associated Person5) Capital Markets Law 143

En los últimos años hemos asistido a un interés creciente de los Estados y las organizaciones supranacionales en las que se integran, por regular las operaciones mercantiles en las que intervienen partes que pueden ejercer influencia significativa en el contenido económico del acuerdo. En consonancia con esta tendencia, el tratamiento de las operaciones vinculadas ha ido tomando relevancia en la regulación del Impuesto sobre Sociedades español, recientemente modificado, mediante la Ley 27/2014, y de su Reglamento, aprobado por el RD 634/2015. El objetivo de este documento es poner de relieve los cambios introducidos en la normativa fiscal aplicable a las operaciones vinculadas y destacar su relación con la propuesta del Proyecto BEPS de la OCDE y el G20, In recent years we have witnessed a growing interest of States and supranational organizations that are integrated to regulate commercial transactions in which parties involved can exert significant influence on the economic substance of the agreement. In line with this trend, the treatment of related party transactions has become increasingly relevant to the regulation of Spanish corporate income tax, as recently amended by Law 27/2014, and the Regulations, approved by Royal Decree 634/2015. The purpose of this paper is to highlight the changes in the tax regulations applicable to related party transactions and highlight their relationship with the proposal of Project BEPS OECD and G20.

We investigate the association between related party transactions (RPT) and real earnings management (REM). We also investigate the role of internal governance mechanism through the effectiveness of board of commissioner and audit committee in mitigating the association between RPT and REM. Our research sample consists of 386 firm-years of manufacturing firms listed in Indonesian Stock Exchange (IDX) from year 2010 - 2014. Using linear regression, we find evidence that RPT has positive association with REM, only when the firm has higher RPT but not in the lower RPT. We find a contradictory result that board of commissioners strengthen the positive association between RPT and REM. Finally, we find evidence that the effectiveness of audit committees weaken the positive association between RPT and REM, both in full sample and in high RPT sample.

This paper contrasts the recent European initiatives on regulating corporate groups with alternative approaches to the phenomenon. In doing so it pays particular regard to the German codified law on corporate groups as the polar opposite to the piecemeal approach favored by E.U. legislation. It finds that the European Commission's proposal to submit (significant) related party transactions to enhanced transparency, outside fairness review, and ex ante shareholder approval is both flawed in its design and based on contestable assumptions on informed voting of institutional investors. In particular, the contemplated exemption for transactions with wholly owned subsidiaries allows controlling shareholders to circumvent the rule extensively. Moreover, vesting voting rights with (institutional) investors will not lead to the informed assessment that is hoped for, because these investors will rationally abstain from active monitoring and rely on proxy advisory firms instead whose competency to analyze non-routine significant related party transactions is questionable. The paper further delineates that the proposed recognition of an overriding interest of the group requires strong counterbalances to adequately protect minority shareholders and creditors. Hence, if the Commission choses to go down this route it might end up with a comprehensive regulation that is akin to the unpopular Ninth Company Law Directive in spirit, though not in content. The latter prediction is corroborated by the pertinent parts of the proposal for a European Model Company Act.