Does Corporate Governance Matter? Evidence from Related Party Transactions in Malaysia
40 Pages Posted: 26 Oct 2011
Date Written: 2011
This paper investigates the relationship between related party transactions, corporate governance and firm performance. Specifically, this paper examines the moderating effect of corporate governance on the related party transactions-performance relationship. Based on 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. Further, we find auditor size as an external governance mechanism could also reduce the negative impact of related party transactions.
Keywords: Corporate governance, related party transactions, MCCG
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