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

40 Pages Posted: 26 Oct 2011

See all articles by Effiezal Aswadi Abdul Wahab

Effiezal Aswadi Abdul Wahab

Curtin University - School of Accounting

Hasnah Haron

Universiti Sains Malaysia (USM) - School of Management

Sofri Yahya

Universiti Sains Malaysia

Char Lee Lok

affiliation not provided to SSRN

Date Written: 2011

Abstract

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

Suggested Citation

Abdul Wahab, Effiezal Aswadi and Haron, Hasnah and Yahya, Sofri and Lok, Char Lee, Does Corporate Governance Matter? Evidence from Related Party Transactions in Malaysia (2011). Advances in Financial Economics, Vol. 14, p. 131, 2011, Available at SSRN: https://ssrn.com/abstract=1949801

Effiezal Aswadi Abdul Wahab (Contact Author)

Curtin University - School of Accounting ( email )

Australia

Hasnah Haron

Universiti Sains Malaysia (USM) - School of Management ( email )

Jalan Sungai Dua
Minden, Penang 11800
Malaysia

Sofri Yahya

Universiti Sains Malaysia ( email )

Minden, Penang
Malaysia

Char Lee Lok

affiliation not provided to SSRN ( email )

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