Related-Party Transactions and Financial Statement Comparability: An Empirical Study of the Conflict of Interest Hypothesis

Subject Areas : Management Accounting

Khadijeh Najafian ¹ , Mehdi Safari Gerayli ²

1 - Msc.student Department of Accounting,Bandargaz Branch, Islamic Azad University, Bandargaz,Iran
2 - Assistant prof, Department of accounting,Bandargaz Branch, Islamic Azad University, Bandargaz,Iran

Received: 2017-01-10 Accepted : 2017-04-04 Published : 2017-12-22

Keywords: related-party transactions, Financial Statement Comparabil, the conflict of interest hypot,

Abstract :

According to the conflict of interest hypothesis, directors take advantage of related-party transactions for their personal benefits so that companies with related-party transactions present less comparable financial information to mask the adverse effects of such transactions and thus prevent stakeholders from recognizing them. Given this argument, this study aims at exploring the effect of related-party transactions on the comparability of financial statements. To do so, a sample of 86 firms listed in Tehran Stock Exchange during the years 2012-2016 were selected and then tested using multivariate regression model based on panel data. In accordance with the conflict of interest hypothesis, the results revealed that related-party transactions lead to a fall in financial information comparability. The findings of the study not only fill the research gap in the field, but also benefit investors, stock exchange and other stakeholders in decision making process

References:

*      بنی مهد، بهمن. عربی،مهدی و حسن پور ، شیوا. (1395). پژوهش‌های تجربی و روش‌شناسی در حسابداری. چاپ اول، تهران: دفتر انتشارات ترمه.

*      ثقفی، علی و مرفوع، محمد.(1390). ریسک نقدشوندگی سهام و کیفیت سود. مطالعات حسابداری، شماره 29، صص.37 -1.

*      دارابی، رویا  و داوودخانی، محمود. (1394) . تأثیر معاملات  با  اشخاص  وابسته  بر ارزش  شرکت . پژوهش‌های حسابداری  مالی و حسابرسی، سال هفتم،  شماره  28، صص152-131.

*      رهنمای رودپشتی، فریدون. وکیلی‌فرد، حمیدرضا. لک، فضل‌اله و محسنی، عبدالرضا (1394). سبک حسابرس و قابلیت مقایسه صورت‌های مالی. فصلنامه حسابداری مدیریت، سال هشتم، شماره 25 ، صص 47-29.

*      سرلک، نرگس و اکبری، مینا.(1392). رابطه بین معاملات با اشخاص وابسته و مدیریت سود . بررسی‌های حسابداری و حسابرسی، دوره 20، شماره چهارم، صص 17-92 .

*      فروغی، داریوش و قاسم زاد، پیمان.(1394). تأثیر قابلیت مقایسه صورت های مالی بر ضریب واکنش سودهای آتی. بررسی‌های حسابداری و حسابرسی ، دوره 22، شماره چهارم، صص 479- 500.

*      فروغی، داریوش و قاسم زاد، پیمان.(1395). تأثیر قابلیت مقایسه صورت های مالی بر همزمانی قیمت سهام. پژوهش‌های حسابداری مالی، شماره 27، صص 54-39.

*      کامیابی، یحیی. بوژمهرانی، احسان و نادرپلنگی، فاضل.(1393). خطای پیش بینی سود، معاملات با اشخاص وابسته و نسبت اعضای غیرموظف هیات مدیره. فصلنامه مطالعات تجربی حسابداری مالی، سال یازدهم، شماره 43 ، صص135-151 .

*      کمیته تدوین استانداردهای حسابداری.(1386). استانداردهای حسابداری.نشریه 160. چاپ نهم.تهران: انتشارات سازمان حسابرسی.

*      مهروز، فاطمه و مرفوع، محمد.(1395). رابطه بین قابلیت مقایسه صورتهای مالی با آگاهی بخشی قیمت سهام در خصوص سودهای آتی.  مطالعات تجربی حسابداری مالی، سال دوازدهم، شماره 49 ، صص83-110.

*      Bae , K ., J. Kang ., and J. Kim.( 2002).Tunneling or Value Added? Evidence from Mergers by Korean Business Groups . The Journal of Finance,  57: 2695–2740.

*      Barth, M. E., R. Landsman, W., H. Lang, M., &D. Williams, C. (2013). Effects on comparability and capital market benefits of voluntary adoption of IFRS by US Firms: Insights from voluntary adoption of IFRS by non-US Firms. Working Paper.Stanford University, University of North Carolina at Chapel Hill, and University of Michigan. available at: http://ssrn.com/abstract=2196247.

*      Bon Kim, J,. Louise, L ,.and Yu , Y.(2015). Financial Statement Comparability and  Expected Crash Risk. Journal of Accounting and Economics , 61 (2-3(:294-312.

*      Brochet, F., D. Jagolinzer, A., and  Riedl, E.  (2012).  Mandatory IFRS adoption and financial statement comparability. Contemporary Accounting Research (forthcoming). Harvard Business School Accounting& Management.Available at SSRN: http://ssrn.com/abstract=1819482.

*      Cheung,Y., P. Rau., and A. Stouraitis.(2006).Tunneling, Propping and Expropriation: Evidence from Connected Party Transactions in Hong Kong. Journal of Financial Economics, 82: 343–386.

*      Choi ,J .H,. Choi .S,. A. Myers ,L ,. And  Ziebart , D.(2015). Financial Statement Comparability and the Informativeness of Stock Prices About Future Earnings,  available at SSRN : http://ssrn.com/abstract=2337571.

*      Claessens , S., J. Fan, and L. H. P. Lang.( 2006). The Benefits and Costs of Group Affiliation: Evidence from East Asia. Emerging Markets Review , 7: 1–26.

*      DeFond, M., and J. Jiambalvo.( 1994). Debt Covenant Violation and Manipulation of Accruals. Journal of Accounting and Economics ,17: 145–176.

*      DeFond, M., and C. Park .( 1997). Smoothing Income in Anticipation of Future Earnings . Journal of Accounting and Economics ,23: 115–139.

*      De Franco, G., S. Kothari, and R. Verdi. (2011). The Benefits of Financial Statement Comparability. Journal of Accounting Research, 49: 895–931.

*      FASB (Financial Accounting Standards Board). 2010. Statement of Financial Accounting Concepts No. 8. Conceptual Framework for Financial Reporting, Chapter 1, the Objective of General Purpose Financial Reporting, and Chapter 3, Qualitative Characteristics of Useful Financial Information. Norwalk, CT: FASB.

*      Francis, J,. Pinnuck ,L. and Watanabe , Olena .(2014). Auditor Style and Financial Statement Comparability.  Journal of The Accountng Review   ,89(2): 605-633.

*      Francis, J., Olsson, P., & Schipper, K. (2006). Earnings Quality. Foundations and  Trends in Accounting, 1(4):259-340.

*      Gong, G., L. Y. Li, and L. Zhou. (2013). Earnings Non-synchronicity and Voluntary Disclosure. Contemporary Accounting Research, 30 (4): 1560–1589.

*      Gordon, E ., and E. Henry. (2005). Related Party Transactions and Earnings Management . Working Paper. Rutgers University.

*      Gujarati, D.N. (2009). Basic Econometrics. 5^th edition. New York: Mc Graw-Hill.

*      Gun Lee, M  ,. Kang, M,.  Young Lee, H.,& Park, J. C.(2014). Related-party transactions and financial statement comparability: evidence from South Korea.  Asia-Pacific Journal of Accounting & Economics Published online, 23) 2):  224-252.

*      Habib ,  A., Jiang  , H ,. and Zhou , D.(2016). Related-Party Transactions and Audit  Fees: Evidence from China . Journal of International Accounting Research  American Accounting Association , 14(1): 59-83.

*      Jian, M ., and T. Wong.( 2003). Earnings Management and Tunneling through Related Party Transactions: Evidence from Chinese Corporate Groups. Working Paper. Nanyang Technological University and Hong Kong University.

*      Jian, M ., and T. Wong.( 2010). Propping through Related Party Transactions. Review of Account Studies,  15 (1): 70–105.

*      Kang, M,.  Lee, H. Y,.  Lee  , M.G ,.& Park, J. C.(2014). The Association between Related-Party Transactions and Control-Ownership Wedge: Evidence from Korea. Journal of Pacific-Basin Finance , 29 : 272-296.

*      Kang ,M  ,.Kim, J.W ,.Lee , H-Y,. and Lee, M-G.(2015). Financial statement comparability and audit Efficiency : evidence from South Korea. Journal of Applied Economics,48(4):358-373.

*      Kim, S ,. Kraft, P ,. and G, Ryan. S.(2013) . Financial statement comparability and credit risk.  Journal of  Review of Accounting Studies,  18(3):783-823.

*      Klein, A. (2002). Audit Committee, Board of Director Characteristics, and Earnings Management. Journal of Accounting and Economics,  33: 375 – 400.

*      Kohlbeck , M ., and B. W. Mayhew. (2010). Valuation of Firms That Disclose Related Party Transactions. Journal of Accounting and Public Policy  ,29: 115–137.

*      Lev, B. (1989). Toward a theory of equitable and efficient accounting policy. The Accounting Review, 43:1−22.

*      Shin, H ., and Y. S. Park.(1999). Financing Constraints and Internal Capital Markets: Evidence from Korean Chaebols. Journal of Corporate Finance,  5: 169–194.

*      Sohn, B. (2011). The Effect of Accounting Comparability on Earnings Management. Working Paper. City University of Hong Kong.

*      Sweeney, A. (1994).  Debt-Covenant Violations and Manager’s Accounting Responses  . Journal of Accounting and Economics, 17 (May): 281–308.

*      Zhang, H. (2013). Accounting Comparability, Audit Effort and Audit Outcomes. Working Paper. Louisiana State University.