 Related party transactions, business relatedness, and firm performanceHong-Da Wang, Chia-Ching Cho and Chan-Jane Lin Journal of Business Research, 2019, vol. 101, issue C, 411-425 Abstract: This study investigates whether business relatedness, i.e., the degree of related diversification within a business group, moderates the relationship between related party trades and firm performance. We predict that when a firm has more group-affiliated partners that share similar industry attributes or are vertically related, RPTs are more likely to be driven by transaction-cost concerns than by expropriation concerns, which leads to better firm performance. Our empirical results show that while related party trades are negatively associated with firm performance, firms with higher similarity in industry attributes or a higher degree of vertical integration within business groups lead to higher performance via related party trades. From samples of selected industries, we further demonstrate that trading with related parties in the same industry does increase firm performance. This paper contributes to the literature by providing better insight into the importance of motivations behind RPTs in determining their impact on firm performance. Keywords: Related party transactions; Business relatedness; Business groups; Firm performance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:101:y:2019:i:c:p:411-425 DOI: 10.1016/j.jbusres.2019.01.066 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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