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Related Party Transactions And Corporate Governance

In: Corporate Governance

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  • Elizabeth A. Gordon
  • Elaine Henry
  • Darius Palia

Abstract

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

Suggested Citation

  • Elizabeth A. Gordon & Elaine Henry & Darius Palia, 2004. "Related Party Transactions And Corporate Governance," Advances in Financial Economics, in: Corporate Governance, pages 1-27, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:afeczz:s1569-3732(04)09001-2
    DOI: 10.1016/S1569-3732(04)09001-2
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    Cited by:

    1. Kinshuk Saurabh, 2023. "Expropriation mechanisms, corporate governance, and cross-border acquisitions by Indian firms," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(4), pages 395-409, December.
    2. Challoner A. Matero & Hsien-Li Lee, 2024. "Impact of Outside Blockholders on Related Party Transactions and Book-tax Conformity Link," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 11(7), pages 1053-1064, July.
    3. Utku ŞENDURUR & Bekir GEREKAN, 2023. "Related Parties Transactions and Firm Value: Intermediate Effect of Sustainability Performance," Sosyoekonomi Journal, Sosyoekonomi Society, issue 31(56).

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