Related Party Transactions and Corporate Governance Mechanisms: Evidence from Firms Listed on the Karachi Stock Exchange
Pakistan Business Review, Vol. 17, No. 3, pp. 663-680, 2015
18 Pages Posted: 26 Nov 2015
Date Written: 2015
This study has investigated the impact of corporate governance mechanisms on related party transactions of Pakistani firms. A sample of 160 non-financial firms are used for the analysis that has reported related party transactions in their annual reports for the sample period 2006 to 2012. The empirical results of different regression models suggested that board independence, blockholdings and institutional ownership play a vital role in the internal governance mechanism. While associated firm ownership, CEO-duality and managerial ownership act as agents that expropriate minor shareholders wealth through related party transactions. Moreover, banking loan, multiple banks in relation and audit quality act as external governance agents and can mitigate the conflict of interest between the minor and major shareholders. These agents may lessen the expropriation through related party transactions by major shareholders, there by securing the interest of minor shareholders.
Suggested Citation: Suggested Citation