A Study on the Relationships among Related Party Transaction, Earning Management, and Corporate Governance
Date Issued
2005
Date
2005
Author(s)
Chen, Hung-Wen
DOI
zh-TW
Abstract
In 2004 Procomp Informatis Ltd had a financial scandal. Examining the composition of board, the board is controlled by Yeh Su-fei and her brother. The top executives are almost insiders as well. Apparently severe weaknesses of corporate governance of Procomp have contributed to the failure of the company substantially.
Therefore, this study discussing the relationship between corporate governance and the degree of earnings management or related party transactions arrangement is for the purpose of examining the effect of corporate governance. Our samples are 554 listed companies in 2003. The results are below:
1. In the part of earnings management: The percentage of ownership hold by insiders has positive impact on discretionary accruals and accounting performance. It appears that higher percentage of ownership hold by insiders, more possibly they may manage earnings by controlling discretionary accruals. Pledged share ratio of insiders has positive impact on discretionary accruals. It seems that insiders may attempt to manage earnings under financial pressure.
2. In the part of related party transactions: The size of board has negative impact on related party sales ratio and other revenues ratios. The percentage of outside directors has negative impact on related party sales ratios, purchases ratios, and receivables ratios. Duality of block holder and chairman has positive impact on related party finance ratio. Duality of chairman and CEO has positive impact on related party sales ratio and purchases ratio. Finally, interactive variance of the two has positive impact on related party sales ratio and receivables ratio. It appears that the independent board will supervise top managers more effectively.
Subjects
公司治理
關係人交易
裁量性應計項目
orporate governance
related party transactions
discretionary accruals
Type
other
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