Abstract
This study examines the association between related-party transactions (RPTs, hereafter) and comparability of accounting information. We posit that comparability decreases with RPTs where much management discretion is likely to be involved in determining volume and terms. In addition, firms conducting RPTs are more likely to make accounting choices which make their accounting information less comparable to their industry peers to prevent government detection of illegal RPTs. Using a unique data-set on RPTs among firms listed on the Korean stock market, we provide evidence consistent with our prediction. Specifically, by defining three different measures of annual RPTs; (1) size of RPTs, (2) volatility of RPTs, and (3) size of non-cash RPTs, we find that financial statement comparability decreases as RPTs increase for all three measures of RPTs. Additional analyses show that the negative association is more pronounced in abnormal RPTs than the predicted RPTs and less pronounced in operating RPTs than non-operating RPTs.
| Original language | English |
|---|---|
| Pages (from-to) | 224-252 |
| Number of pages | 29 |
| Journal | Asia-Pacific Journal of Accounting and Economics |
| Volume | 23 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2016 Apr 2 |
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All Science Journal Classification (ASJC) codes
- Accounting
- Finance
- Economics and Econometrics
Cite this
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Related-party transactions and financial statement comparability : evidence from South Korea. / Lee, Myung Gun; Kang, Minjung; Lee, Ho Young; Park, Jong Chool.
In: Asia-Pacific Journal of Accounting and Economics, Vol. 23, No. 2, 02.04.2016, p. 224-252.Research output: Contribution to journal › Article
TY - JOUR
T1 - Related-party transactions and financial statement comparability
T2 - evidence from South Korea
AU - Lee, Myung Gun
AU - Kang, Minjung
AU - Lee, Ho Young
AU - Park, Jong Chool
PY - 2016/4/2
Y1 - 2016/4/2
N2 - This study examines the association between related-party transactions (RPTs, hereafter) and comparability of accounting information. We posit that comparability decreases with RPTs where much management discretion is likely to be involved in determining volume and terms. In addition, firms conducting RPTs are more likely to make accounting choices which make their accounting information less comparable to their industry peers to prevent government detection of illegal RPTs. Using a unique data-set on RPTs among firms listed on the Korean stock market, we provide evidence consistent with our prediction. Specifically, by defining three different measures of annual RPTs; (1) size of RPTs, (2) volatility of RPTs, and (3) size of non-cash RPTs, we find that financial statement comparability decreases as RPTs increase for all three measures of RPTs. Additional analyses show that the negative association is more pronounced in abnormal RPTs than the predicted RPTs and less pronounced in operating RPTs than non-operating RPTs.
AB - This study examines the association between related-party transactions (RPTs, hereafter) and comparability of accounting information. We posit that comparability decreases with RPTs where much management discretion is likely to be involved in determining volume and terms. In addition, firms conducting RPTs are more likely to make accounting choices which make their accounting information less comparable to their industry peers to prevent government detection of illegal RPTs. Using a unique data-set on RPTs among firms listed on the Korean stock market, we provide evidence consistent with our prediction. Specifically, by defining three different measures of annual RPTs; (1) size of RPTs, (2) volatility of RPTs, and (3) size of non-cash RPTs, we find that financial statement comparability decreases as RPTs increase for all three measures of RPTs. Additional analyses show that the negative association is more pronounced in abnormal RPTs than the predicted RPTs and less pronounced in operating RPTs than non-operating RPTs.
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UR - http://www.scopus.com/inward/citedby.url?scp=84908565557&partnerID=8YFLogxK
U2 - 10.1080/16081625.2014.957706
DO - 10.1080/16081625.2014.957706
M3 - Article
AN - SCOPUS:84908565557
VL - 23
SP - 224
EP - 252
JO - Asia-Pacific Journal of Accounting and Economics
JF - Asia-Pacific Journal of Accounting and Economics
SN - 1608-1625
IS - 2
ER -