Related Party Transactions, Family Firms and Firm Performance: Some Malaysian Evidence

33 Pages Posted: 10 Nov 2010 Last revised: 14 Feb 2011

See all articles by Sa'adiah Munir

Sa'adiah Munir

Monash University - Sunway Campus

Reza Jashen Gul

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: April 13, 2010

Abstract

We examine the link between related party transactions (RPT) and firm performance, and also whether RPT in family firms are more likely to be used opportunistically to expropriate minority shareholders, hence lower the firm performance. Using regression analysis of 462 Malaysian companies, we show that RPT is negatively associated with firm performance. Further, we also show that this association is stronger for family firms than non-family firms. The findings suggest that RPTs carried out by family firms, are more likely to be used opportunistically to expropriate minority shareholders. The evidence is consistent with entrenchment hypothesis and tunneling.

Keywords: Malaysia, Corporate Governance, Related Party Transactions, Family Ownership, Firm Performance

Suggested Citation

Munir, Sa'adiah and Gul, Reza Jashen, Related Party Transactions, Family Firms and Firm Performance: Some Malaysian Evidence (April 13, 2010). Finance and Corporate Governance Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1705846 or http://dx.doi.org/10.2139/ssrn.1705846

Sa'adiah Munir (Contact Author)

Monash University - Sunway Campus

Jalan Lagoon Selatan
Bandar Sunway
Selangor, 46150
Malaysia

Reza Jashen Gul

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong

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