Title: Related party transactions, earnings management and governance mechanism in emerging markets: the case of GCC countries

Authors: Gehan A. Mousa; Abdelmohsen M. Desoky; Mohamed Yassin

Addresses: Accounting Department, Benha University, P.O. Box 13518, Benha, Egypt ' Accounting Department, University of Bahrain, P.O. Box 32028, Bahrain ' Accounting Department, University of Bahrain, P.O. Box 32028, Bahrain; Tanta University, Egypt

Abstract: The main purpose of this study is to examine the impact of earnings management (EM) and some governance mechanisms on related party transactions (RPTs) of listed firms in four emerging stock markets, which are members of the Gulf Cooperation Council (GCC). A sample of 454 firm-year observations is used during a four-year period (2016-2019). Four models of hierarchical multiple regression (HMR) are performed to regress five independent variables (firm EM, AC independence, the number of AC meetings, AC size and EXQ) on RPTs which are represented by two main transactions (purchases of goods from RP and sales of goods to RP). Linear HMR regression models indicate that only two independent variables (firm EM and EXQ) are significantly explaining both dependent variables of RPTs, and they are not explained by any AC independent variable. Findings of this study suggest that the mere presence of RPTs does not necessarily suggest that firms' management engage in greater earnings management. This study may afford additional valued insights on factors affecting RPTs.

Keywords: related party transactions; earnings management; audit committee attributes; external audit quality.

DOI: 10.1504/IJEBR.2023.131783

International Journal of Economics and Business Research, 2023 Vol.26 No.1, pp.1 - 23

Received: 14 Mar 2021
Accepted: 08 Jun 2021
Published online: 03 Jul 2023 *