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The impact of related party transactions on the operational performance of listed companies in China

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  • Yenpao Chen
  • Chien‐Hsun Chen
  • Weiju Chen

Abstract

This study uses a comprehensive sample of 763 Chinese listed companies to explore the relationship between the extent of related party transactions and operational performance. The empirical results show that when the listed company is controlled by a related party, the higher the level of related party transactions, the worse the operational performance of the listed company; this is particularly true in the case of related party transactions that involve sales, loans, guarantees and mortgages, or leases. There is thus a clear need to improve the regulation of related party transactions and the related disclosure requirements.

Suggested Citation

  • Yenpao Chen & Chien‐Hsun Chen & Weiju Chen, 2009. "The impact of related party transactions on the operational performance of listed companies in China," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 12(4), pages 285-297.
    • Handle: RePEc:taf:jecprf:v:12:y:2009:i:4:p:285-297
    DOI: 10.1080/17487870903314575
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    References listed on IDEAS

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    1. Claessens, Stijn & Djankov, Simeon & Joseph P. H. Fan & Lang, Larry H. P., 1999. "Expropriation of minority shareholders : evidence from East Asia," Policy Research Working Paper Series 2088, The World Bank.
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    Cited by:

    1. Wang, Wei & Zhang, Yue-Jun, 2022. "Does China's carbon emissions trading scheme affect the market power of high-carbon enterprises?," Energy Economics, Elsevier, vol. 108(C).
    2. Setiyono, Bowo & Munawaroh, U’um, 2024. "Related party lending and rural bank risk: Evidence during the Covid-19 period," Research in International Business and Finance, Elsevier, vol. 67(PB).
    3. Ajaz Ul Islam, 2020. "Do Shareholder Activism Effect Corporate Governance and Related Party Transactions: Evidences from India?," Indian Journal of Corporate Governance, , vol. 13(2), pages 165-189, December.
    4. Susan Jepkorir Mursoi & Willy Muturi & James Ndegwa, 2021. "Related party transactions and financial distress of Savings and Credit Cooperative Organizations (SACCOs) in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(1), pages 131-138, January.
    5. Wu, Huiying & Patel, Chris & Perera, Hector, 2015. "Implementation of “audit committee” and “independent director” for financial reporting in China," Advances in accounting, Elsevier, vol. 31(2), pages 247-262.
    6. Farooq, Muhammad Umar & Su, Kun & Boubaker, Sabri & Ali Gull, Ammar, 2022. "Does gender promote ethical and risk-averse behavior among CEOs? An illustration through related-party transactions," Finance Research Letters, Elsevier, vol. 47(PB).
    7. Mai, Nhat Chi, 2020. "Related Party Transactions, State Ownership, the Cost of Corporate Debt, and Corporate Tax Avoidance: Evidence from Vietnam," OSF Preprints y5qj3, Center for Open Science.
    8. Martina Vallesi, 2013. "A measure of the sustainable connection between highest remunerations? and economic performance," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 2013(2), pages 145-159.
    9. Jiang, Fuxiu & Kim, Kenneth A. & Nofsinger, John R. & Zhu, Bing, 2017. "A pecking order of shareholder structure," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 1-14.
    10. Pier Luigi Marchini & Tatiana Mazza & Alice Medioli, 2018. "The impact of related party transactions on earnings management: some insights from the Italian context," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(4), pages 981-1014, December.
    11. Sumiyana Sumiyana & Ainun Na’im & Albertus H. L. Nugroho & Firdaus Kurniawan, 2023. "Multiple measurements of CEOs’ overconfidence and future earnings management: evidence from Asia-Pacific developing countries," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    12. Guang-Zheng Chen, 2020. "Related Party Transactions and Opinion Shopping," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(1), pages 1-9.
    13. Abdul Rasheed P C & T. Mallikarjunappa & K.T. Thomachan, 2019. "Promoter Ownership, Related Party Transactions and Firm Performance: A Study Among Selected Companies in India," FIIB Business Review, , vol. 8(3), pages 205-217, September.

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