Does Corporate Governance Matter? Evidence from Related Party Transactions in Malaysia
Citation
Abdul Wahab, Effiezal Aswadi and Hasnah, Haron and Lok, Char Lee and Yahya, Sofri. 2011. Does Corporate Governance Matter? Evidence from Related Party Transactions in Malaysia, in Kose John, Anil K. Makhija (ed) International Corporate Governance, pp. 131-164. Advances in Financial Economics; 14. Bingley, UK: Emerald Group Publishing.
Source Title
Advances in Financial Economics
ISSN
Collection
Abstract
This chapter investigates the relationship between related party transactions (RPTs), corporate governance, and firm performance. Specifically, this chapter examines the moderating effect of corporate governance on the RPTs–performance relationship. On the basis of 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. Furthermore, we find auditor size as an external governance mechanism could also reduce the negative impact of RPTs.
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