The Association between Corporate Governance and Related-Party Transactions

• Main Authors: Wen-Ping Lin, 林汶平
• Other Authors: Der-Fen Huang
• Format: Others
• Published: 2017
• Online Access: http://ndltd.ncl.edu.tw/handle/yk4475

碩士 === 國立東華大學 === 會計與財務碩士學位學程 === 105 === Prior literatures focus on the impacts of governance mechanisms on corporate values. Few studies on the relationship between corporate governance and related-party transactions (RPTs) or transfer pricing decisions. This research aims to investigate the association between abnormal RPTs and corporate governance from the board and ownership structure perspectives. The empirical results show that: (1) The size of board is positively related to abnormal RPTs. Due to the greater size of board, the greater likelihood that controlling shareholder joined the board, and that increases the likelihood of abnormal RPTs. (2) The number of independent directors is negatively related to abnormal RPTs. This indicates that independent directors could effectively exercise their superintendence, and reduce the possibility for controlling shareholders to seek private benefits by RPTs. (3) The blockholders and managers increase their shareholdings could effectively reduce the abnormal RPTs. Because of their own interests, the blockholders would have more motivations to monitor company and prevent abnormal RPTs from arising. (4) Supervisors’ and institutions’ shareholdings are positively related to abnormal RPTs. Many Taiwan companies are controlled by pyramidal group, that increases the management motives for conducting RPTs based on strategic alignment. (5) The control ownership wedge and duality are positively related to abnormal RPTs. Indicating that combined ownership and control would increase self-interested behaviors of management, and that is harmful to the benefits of minority shareholders. The above results cannot be explained by the traditional agency theory entirely, indicating there are potential conflicts of interests between the controlling shareholders and minority shareholders. Overall, RPTs might use as a means of tunneling interest of controlling shareholders, and expropriating the wealth from minority shareholders.