Buy High, Sell Low: How Listed Firms Price Asset Transfers in Related Party Transactions

Posted: 10 Dec 2008 Last revised: 14 Sep 2012

See all articles by Stephen Yan-Leung Cheung

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Yuehua Qi

affiliation not provided to SSRN

P. Raghavendra Rau

University of Cambridge

Aris Stouraitis

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: September 20, 2009

Abstract

We examine a sample of 254 related party and arms' length acquisitions and sales of assets in Hong Kong during 1998-2000. Our analysis shows that publicly listed firms enter deals with related parties at unfavourable prices compared to similar arms' length deals. Firms acquire assets from related parties by paying a higher price compared to similar arms' length deals. In contrast, when they sell assets to related parties, they receive a lower price than in similar arms' length deals. With the exception of audit committees, corporate governance characteristics have limited impact on transaction prices. Firms with audit committees on their boards pay lower prices to related parties for acquisitions and receive higher prices from related parties from divestments.

Keywords: International corporate governance, Expropriation, Related party transactions, Tunneling

JEL Classification: G15 , G34, K33

Suggested Citation

Cheung, Stephen Yan-Leung and Qi, Yuehua and Rau, P. Raghavendra and Stouraitis, Aristotelis, Buy High, Sell Low: How Listed Firms Price Asset Transfers in Related Party Transactions (September 20, 2009). Journal of Banking and Finance, 33 (5), 914-924, 2009. Available at SSRN: https://ssrn.com/abstract=1314160

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
+852 2788 7960 (Phone)
+852 2788 8806 (Fax)

Yuehua Qi

affiliation not provided to SSRN

P. Raghavendra Rau

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

Aristotelis Stouraitis (Contact Author)

Hong Kong Baptist University (HKBU) - Department of Finance and Decision Sciences ( email )

Hong Kong

Register to save articles to
your library

Register

Paper statistics

Abstract Views
743
PlumX Metrics