Related-party transactions, dominant owners and firm value

Abstract

We examine RPTs in one Continental European country, Spain, where ownership concentration is prevalent and state ownership is practically non-existent. Our results show that more than half of listed Spanish firms commit to RPTs over the analyzed period. Furthermore, from the perspective of the related party to the transaction, connected transactions between listed Spanish firms and their blockholders account for 99.84% of the total RPTs carried out by listed Spanish firms. Finally, our findings reveal that financial, operating and investment dimensions of RPTs negatively affect firm value due to the presence of an expropriation effect whereby RPTs are driven by insiders’ opportunism, regardless of the dimension (financial, operating and investment) affected by the existence of RPTs. Thus, in a context where the main concern of corporate governance is the potential expropriation of minority shareholders by controlling owners, RPTs require special regulator's attention in order to improve investor protection and market confidence to promote a more efficient allocation of resources.

Net operating working capital and firm value: A cross-country analysis

“…In this sense, firms in financial distress or with difficulties for financing new projects have a higher propensity to sell their accounts receivable (Sopranzeti, 1999). Moreover, business groups, which are more prominent in countries with lower investor protection, might also use a commercial transaction for engaging in tunneling activities by using related party transaction (Bona-Sánchez et al, 2017). From the practitioner’s perspective, firms usually have too much investment in NWC that can be transformed in cash for more efficient uses (Ek & Guerin, 2011; Ernst and Young, 2016).…”

Tax Amnesty as a Control Variable Affects The Relationship between Domestic Institutional Shareholders and the Firm Value.

“…When this relationship becomes negative (share ownership more than 42.78%), the purpose of the domestic institutional shareholders is no longer to increase the firm value measured by Tobin Q, there may be other objective, such as related party transactions, as explained by Sánchez et. al (2017) [21].…”

Related‐party transactions and corporate performance following the adoption of International Financial Reporting Standards in Taiwan

“…Huang and Liu () documented that related‐party transactions cause more severe agency costs and thus bring about negative impacts on the corporate performance of Taiwanese high‐technology firms. Similarly, Bona‐Sánchez, Fernández‐Senra, and Pérez‐Alemán () concurred on the expropriation effect of related‐party transactions, and Wang, Cho, and Lin () also showed that related‐party transactions are negatively related to corporate performance. Since related‐party transactions could also be driven by transaction‐cost concerns, which leads to better firm performance., this study states the first hypothesis in its nondirectional form as follows.Hypothesis Related‐party transactions affect corporate performance.…”