Does Corporate Governance Matter? Evidence from Related Party Transactions in Malaysia

Effiezal Aswadi Abdul Wahab, Hasnah Haron, Char Lee Lok and Sofri Yahya

A chapter in International Corporate Governance, 2011, pp 131-164 from Emerald Group Publishing Limited

Abstract: This chapter investigates the relationship between related party transactions (RPTs), corporate governance, and firm performance. Specifically, this chapters examines the moderating effect of corporate governance on the RPTs–performance relationship. On the basis of 448 firm-year sample for 2005–2007, we find evidence that related transactions are detrimental to shareholders and thus reducing firm performance. However, the negative effect is mitigated with the presence of good governance, namely level of board independence and executive remuneration. Furthermore, we find auditor size as an external governance mechanism could also reduce the negative impact of RPTs.

Keywords: Corporate governance; related party transactions; MCCG (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afeczz:s1569-3732(2011)0000014009

DOI: 10.1108/S1569-3732(2011)0000014009

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