An Analysis of Related-Party Transactions in India

27 Pages Posted: 12 Nov 2013

See all articles by Padmini Srinivasan

Padmini Srinivasan

Indian Institute of Management Bangalore

Date Written: September 30, 2013

Abstract

Related-party transactions (RPTs) refer to transactions between a company and its related entities such as subsidiaries, associates, joint ventures, substantial shareholders, executives, directors and their relatives, or entities owned or controlled by its executives, directors, and their families. RPTs are widespread and are part of every business group activity. RPTs have come under close scrutiny in recent years as they have been misused by companies as revealed in various corporate scandals. The study analyses Indian companies for three years between 2009 and 2011 and finds that RPTs were widespread and present in almost all companies during this period. Further, companies with high RPTs related to sales and income were found to report lower performance compared to companies with low RPTs. While ownership structure failed to offer any explanation for the magnitude of RPTs, RPTs were found to be lower in companies where big audit firms were statutory auditors.

Keywords: Related party transactions, Corporate governance, Indian companies

Suggested Citation

Srinivasan, Padmini, An Analysis of Related-Party Transactions in India (September 30, 2013). IIM Bangalore Research Paper No. 402, Available at SSRN: https://ssrn.com/abstract=2352791 or http://dx.doi.org/10.2139/ssrn.2352791

Padmini Srinivasan (Contact Author)

Indian Institute of Management Bangalore ( email )

Bannerghatta Road
Bangalore, 560 076
India

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