Related party transactions, benefits of control and earnings quality

Frontiers of Business Research in China - Tập 2 - Trang 187-203 - 2008
Yan Tong1, Huacheng Wang2
1School of Management and Economics, Beijing Institute of Technology, Beijing, China
2School of Business, Renmin University of China, Beijing, China

Tóm tắt

Controlling shareholders pursue benefits of control (private benefits and shared benefits) via related party transactions, which result in different levels of earnings quality. Using data from all A-share listed companies in Shenzhen and Shanghai stock markets in the year 2001 and 2002, we found that when the share ratio of controlling shareholder is less than 50%, they prefer pursuing private benefits of control via related party transactions, giving rise to deterioration in earnings quality. By comparison, when the share ratio is more than 50%, controlling shareholders prefer pursing shared benefits of control through related party transactions, which improve earnings quality as a result.

Tài liệu tham khảo

Aghion P, Bolton P(1992). An incomplete contract approach to financial contracting. Review of Economic Studies, 59: 473–494 Baron R M, Kenny D A(1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51: 1173–1182 Chang S J(2003). Ownership structure, expropriation, and performance of group-affiliated companies in Korea. Academy of Management Journal, 46(2): 238–253 Chen Xiao, Wang Kun(2005). Related party transactions, corporate governance and state ownership reform. Economic Research Journal, (4): 77–86 (in Chinese) Cheung Yan-Leung, Rau P R, Stouraitis A(2004). Tunneling, propping and expropriation: Evidence from connected party transactions in Hong Kong. SSRN Working Paper Coase R H(1937). The Firm, the Market and the Law. Chicago: University of Chicago Press Dyck A, Zingales L(2004). Private benefits of control: an international comparison. The Journal of Finance, 59(2): 537–600 Fan J P H, Wong T J(2002). Corporate ownership structure and the informativeness of accounting earnings in East Asia. Journal of Accounting and Economics, 33: 401–425 Freedman L S, Schatzkin A(1992). Sample size for studying intermediate endpoints within intervention trials of observational studies. American Journal of Epidemiology, 136: 1148–1159 Gilson R J, Gordon J N(2003). Controlling shareholders. SSRN Working Paper Gordon E A, Henry E(2003). Related party transactions and earnings management. SSRN Working Paper Harris M, Raviv A(1988). Corporate governance: Voting rights and majority rules. Journal of Financial Economics, 20: 203–235 Hayn C(1995). The information content of losses. Journal of Accounting and Economics, 20: 123–153 Holderness C G(2003). A survey of blockholders and corporate control. Economic Policy Review, 9(1): 51–63 Hong Jianqiao, Fang Junxiong(2005). The value relevance of related party transactions and earnings. China Accounting Review, 3(1): 87–98 (in Chinese) Huang Shizhong(2001). Challenges to the quality of accounting information of listed companies. Accounting Research, 10: 6–11 (in Chinese) Jian M, Wong T J(2004). Earnings management and tunneling through related party transactions: Evidence from Chinese corporate groups. SSRN Working Paper Li Zengquan, Sun Zheng, Wang Zhiwei(2004). Tunneling and ownership structure of a firm: Evidence from controlling shareholder’s embezzlement of listed company’s funds in China. Accounting Research, (12): 3–13 (in Chinese) MacKinnon D P, Lockwood C M, Hoffman J M, West S G, Sheets V(2002). A comparison of methods to test mediation and other intervening variable effects. Psychological Methods, 7(1): 83–104 Mikkelson W, Ruback R S(1985). An empirical analysis of the interfirm equity investment process. Journal of Financial Economics, (14): 523–553 Shaver J M(2005). Testing for mediating variables in management research concerns, implications and alternative strategies. Journal of Management, 31(3): 330–353 Shleifer A, Vishny R W(1986). Large shareholders and corporate control. Journal of Political Economy, 95: 461–488 Sun Yongxiang, Huang Zuhui(1999). Ownership structure and performance of the listed companies. Economic Research Journal, (2): 23–50 (in Chinese) Wang Huacheng, Tong Yan(2006). Controlling shareholders and earnings quality. Accounting Research, (2): 66–74(in Chinese) Yu Minggui, Xia Xinping(2004). Controlling shareholder, agency problem and related party transaction: Evidence from China’s listed companies. Nankai Business Review, 7(6): 56–61 (in Chinese)