Listening Skills: Accountancy Educators in Retreat?

Abstract

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 closelyheld 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.

محددات حدوث المعاملات مع الأطراف ذوی العلاقة: دراسة تطبیقیة على الشرکات المسجلة فی البورصة المصریة ( باللغة الإنجلیزیة )

“…monitoring role of the independent directors in controlling the payments to the related parties. The significantly negative relationship between the board independence and RPTs is supported by the findings of Gordon et al, 2004;Kohlbeck and Mayhew 2004;Azim et al, 2018;Gallery, Gallery and Supranowicz;2008, Abdullatif et al,2019. On the contrary, other empirical studies have found a positive relationship between the independence of board of directors and RPTs such as Sharkar et al, 2007, Chen et al, 2014, Wu and Li, 2015, Zhu et al, 2016, Boateng and Huang, 2017, and Reguera-Alvarado and Bravo, 2017.…”

“…Empirical studies have generally found a positive relation between the RPTs and the firm's leverage such as Nekhili & Cherif, 2011, and Utama & Utama, 2014, Abdullatif, et al, 2019 and this is reasonable because firms with high leverage is most likely to engage into RPTs to overcome this. In this research, we expect that the firm's leverage is to be positively related to the RPTs of firms in Egypt.…”

“…Although, the inside directors are more understanding and experience about the firm's activities, however the outside directors can better monitor the executive management and protect the rights of the shareholders because they are free from any conflict of interest and thereby mitigating the agency problems (Fama and Jensen 1983;Fama 1980). Accordingly, the percent of insider directors on the board is viewed as an indicator of board non-independence, the greater the percentage of the insiders, the less independent the board (Abdullatif, et al, 2019;Garner, et al, 2017). The outside directors should ensure that the financial decisions are made in the best interests of all shareholders and should not result in earnings that are biased toward the managers or the controlling shareholders (Donaldson and Preston, 1995).…”

“…OWCN it : The ownership concentration, which is measured by the total ownership percentage of shares owned by individual or institutional shareholders who own 5 per cent or more shares in the firm (Abdullatif, et al, 2019).…”

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“…These are the primary research questions addressed by the papers published in this issue of AABFJ. Abdullatif, Alhadab and Mansour (2019) investigated the relationship between various financial and governance factors and related party transactions of Jordanian companies. Research on related party transactions is exhaustively done.…”