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Related Parties Transactions and Firm's Market Value: the French Case

Mehdi Nekhili () and Moez Cherif

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Abstract: Main shareholders, directors and managers can expropriate minority shareholders by carrying out certain transactions with the company. The objective of this article is to study the impact of these transactions on the value of the company, and to identify the ownership and governance characteristics of companies that engage in this type of transaction. The results of the regressions carried out on a sample of 85 companies listed on the Paris Stock Exchange during the period 2002-2005 show that related party transactions are mainly influenced, to various degrees, by the voting rights held by the main shareholder, the size of the board of directors, the degree of independence enjoyed by the audit committee and the board of directors, the choice of external auditor, the debt ratio and the fact of being listed in the United States. One segmentation of our sample shows that it is mainly transactions carried out directly with the main shareholders, directors and/or managers that have a negative influence on the value of the company.

Keywords: Related party transactions; minority expropriation; ownership structure; governance; firm value; France (search for similar items in EconPapers)
Date: 2011-03-10
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Published in 6th International Finance Conference, Mar 2011, Hammamet, Tunisia

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