Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management

Expropriation through Related Party Transaction (RPT) has been identified as one of the key factors that led to the collapse of several firms globally. Hence, its regulation becomes necessary. This study examines the extent and the determinants of compliance with the disclosure requirements on RPTs...

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Main Author:	Maigoshi, Zaharaddeen Salisu
Format:	Thesis
Language:	eng eng
Published:	2018
Subjects:	HF5601-5689 Accounting
Online Access:	https://etd.uum.edu.my/7650/1/s900717_01.pdf https://etd.uum.edu.my/7650/2/s900717_02.pdf
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id	my-uum-etd.7650
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
advisor	Abdul Latif, Rohaida Kamardin, Hasnah
topic	HF5601-5689 Accounting
spellingShingle	HF5601-5689 Accounting Maigoshi, Zaharaddeen Salisu Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management
description	Expropriation through Related Party Transaction (RPT) has been identified as one of the key factors that led to the collapse of several firms globally. Hence, its regulation becomes necessary. This study examines the extent and the determinants of compliance with the disclosure requirements on RPTs by Malaysian listed firms. It also investigates the value-relevance of Malaysian Financial Reporting Standard (MFRS) 124 adoption, real earnings management (REM) in RPTs and the moderating effect of compliance with MFRS 124 on the relationship between REM in RPTs and firm value. The study uses the data collected from the firms with significant RPTs from 2009 to 2015. Findings from the weighted disclosure index indicate a moderate level of compliance with MFRS 124. Furthermore, the regression results reveal that board independence, audit committee financial expertise, family ownership, managerial ownership and firm growth have significant positive relationships with the compliance of MFRS 124. Moreover, the study documents that RPTs disclosure is value-relevant. Findings of price model provide evidence that with the adoption of MFRS 124, capital market participants value the EPS of the RPT firms over its BVPS. The study documents that firms use RPTs to perpetrate REM. The results of the Roychowdhury models show that RPTs firms are characterized by low cash flow from operations, high production costs and low discretionary expenditures. It is also established that capital market discounts the stock price of firms that perpetrate REM in RPTs. Also, compliance with disclosure requirements on RPTs mitigates the negative relationship between REM in RPTs and firm value. The study reveals the need for the relevant authorities to increase the level of enforcement to achieve full compliance which will result to increase transparency of financial reporting and investor protection. The results of this study contribute to the agency, resource dependency and capital market theories.
format	Thesis
qualification_name	other
qualification_level	Doctorate
author	Maigoshi, Zaharaddeen Salisu
author_facet	Maigoshi, Zaharaddeen Salisu
author_sort	Maigoshi, Zaharaddeen Salisu
title	Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management
title_short	Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management
title_full	Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management
title_fullStr	Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management
title_full_unstemmed	Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management
title_sort	related party transaction disclosure: compliance, determinants, value-relevance and real earnings management
granting_institution	Universiti Utara Malaysia
granting_department	Tunku Puteri Intan Safinaz School of Accountancy (TISSA)
publishDate	2018
url	https://etd.uum.edu.my/7650/1/s900717_01.pdf https://etd.uum.edu.my/7650/2/s900717_02.pdf
_version_	1747828248759238656
spelling	my-uum-etd.76502022-08-21T05:02:42Z Related party transaction disclosure: compliance, determinants, value-relevance and real earnings management 2018 Maigoshi, Zaharaddeen Salisu Abdul Latif, Rohaida Kamardin, Hasnah Tunku Puteri Intan Safinaz School of Accountancy (TISSA) Tunku Intan Safinaz School of Accountancy (TISSA) HF5601-5689 Accounting Expropriation through Related Party Transaction (RPT) has been identified as one of the key factors that led to the collapse of several firms globally. Hence, its regulation becomes necessary. This study examines the extent and the determinants of compliance with the disclosure requirements on RPTs by Malaysian listed firms. It also investigates the value-relevance of Malaysian Financial Reporting Standard (MFRS) 124 adoption, real earnings management (REM) in RPTs and the moderating effect of compliance with MFRS 124 on the relationship between REM in RPTs and firm value. The study uses the data collected from the firms with significant RPTs from 2009 to 2015. Findings from the weighted disclosure index indicate a moderate level of compliance with MFRS 124. Furthermore, the regression results reveal that board independence, audit committee financial expertise, family ownership, managerial ownership and firm growth have significant positive relationships with the compliance of MFRS 124. Moreover, the study documents that RPTs disclosure is value-relevant. Findings of price model provide evidence that with the adoption of MFRS 124, capital market participants value the EPS of the RPT firms over its BVPS. The study documents that firms use RPTs to perpetrate REM. The results of the Roychowdhury models show that RPTs firms are characterized by low cash flow from operations, high production costs and low discretionary expenditures. It is also established that capital market discounts the stock price of firms that perpetrate REM in RPTs. Also, compliance with disclosure requirements on RPTs mitigates the negative relationship between REM in RPTs and firm value. The study reveals the need for the relevant authorities to increase the level of enforcement to achieve full compliance which will result to increase transparency of financial reporting and investor protection. The results of this study contribute to the agency, resource dependency and capital market theories. 2018 Thesis https://etd.uum.edu.my/7650/ https://etd.uum.edu.my/7650/1/s900717_01.pdf text eng public https://etd.uum.edu.my/7650/2/s900717_02.pdf text eng public http://sierra.uum.edu.my/record=b1698813~S1 other doctoral Universiti Utara Malaysia Abad, D., Cutillas-Gomariz, M. F., Sánchez-Ballesta, J. P., & Yagüe, J. (2016). Real Earnings Management and Information Asymmetry in the Equity Market. European Accounting Review, 1–27. Abbott, L. J., Parker, S., & Peters, G. F. (2004). Audit committee characteristics and restatements. 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