Discriminatory Related Party Transactions: A New Measure

28 Pages Posted: 20 Dec 2012 Last revised: 10 Sep 2023

See all articles by Mohammad Tareq

Mohammad Tareq

RMIT University

Noor Houqe

School of Accountancy

Tony van Zijl

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration

Dennis William Taylor

Royal Melbourne Institute of Technolog (RMIT University)

Clive Morley

Royal Melbourne Institute of Technolog (RMIT University) - Graduate School of Business and Law

Date Written: March 2017

Abstract

Discretionary related party transactions (also known as tunnelling or self-dealing transactions) are non-arms length transactions with related parties of controlling shareholders for private benefit at the cost of other shareholders. Though there are studies on discriminatory related party transactions, there has been limited effort to develop a measure for such discriminatory transactions. Current measures are based on weak theoretical underpinnings and prone to high measurement error. This paper develops and tests a new measure for these discriminatory transactions. Type 1, Type 2 error rates and power of the new measurement are compared with an existing measure using computer simulated and real data. The capital market sensitivity of the new measure is also tested and compared with an existing measure. The new measure is found to be superior. This is the first systematic effort to develop a measure for discriminatory related party transactions. It will contribute in policy-making in relation to discriminatory related party transactions.

Keywords: Related-party transactions, tunnelling, minority shareholders, discriminatory transactions

JEL Classification: M41

Suggested Citation

Tareq, Mohammad and Houqe, Muhammad Nurul and van Zijl, Tony and Taylor, Dennis William and Morley, Clive, Discriminatory Related Party Transactions: A New Measure (March 2017). International Journal of Accounting and Information Management (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2190897 or http://dx.doi.org/10.2139/ssrn.2190897

Mohammad Tareq (Contact Author)

RMIT University ( email )

445 Swanston Street
Melbourne, Victoria 3056
Australia

Muhammad Nurul Houqe

School of Accountancy ( email )

New Zealand

Tony Van Zijl

Victoria University of Wellington - Te Herenga Waka - Faculty of Commerce and Administration ( email )

RH 606, Pipitea Campus, 6th Floor, Rutherford Hous
23 Lambton Quay
Wellington
Australia

Dennis William Taylor

Royal Melbourne Institute of Technolog (RMIT University) ( email )

124 La Trobe Street
Melbourne, 3000
Australia

Clive Morley

Royal Melbourne Institute of Technolog (RMIT University) - Graduate School of Business and Law ( email )

Melbourne
Australia

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