Impact of Outside Blockholders on Related Party Transactions and Book-tax Conformity Link

Challoner Matero and Hsien-Li Lee
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Hsien-Li Lee: Department of Accounting, Chung Yuan Christian University, College of Business, Republic of China

International Journal of Research and Scientific Innovation, 2024, vol. 11, issue 7, 1053-1064

Abstract: This study assesses the effects of transfer pricing audit rules in 2005 on related party transactions and book-tax conformity. Further, the presence of outside blockholder beneficially owning at least five percent of the company’s outstanding common stocks is examined. Data from 2003 to 2007 and 2018 of Taiwan-listed firms were collected from the Taiwan Economic Journal database and estimated by ordinary least squares using EViews. This study finds that book-tax conformity has no relation to related party transactions. The presence of outside blockholders is significant in the 2005 sample which might have resulted from an implementation of Transfer Pricing Assessment Rules. However, the presence of outside blockholder as an effective monitor over related party transactions – book-tax conformity link has no evidence. This paper offers evidence in an Asian context to enrich the discussion on related party transactions, book-tax conformity and outside blockholders. The finding is robust to an alternate measure of book-tax conformity.

Date: 2024
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