TY - CHAP
T1 - RELATED PARTY TRANSACTIONS AND CORPORATE GOVERNANCE
AU - Gordon, Elizabeth A.
AU - Henry, Elaine
AU - Palia, Darius
N1 - Funding Information:
We thank an anonymous referee and Anil Makhija (Editor) for helpful comments. The authors gratefully acknowledge the Rutgers Business School Research Resources Fund for providing support for this project.
PY - 2004
Y1 - 2004
N2 - Transactions between a firm and its own managers, directors, principal owners or affiliates are known as related party transactions. Such transactions, which are diverse and often complex, represent a corporate governance challenge. This paper initiates research in finance on related party transactions, which have implications for agency literature. We first explore two alternative perspectives of related party transactions: the view that such transactions are conflicts of interest which compromise management's agency responsibility to shareholders as well as directors' monitoring functions; and the view that such transactions are efficient transactions that fulfill rational economic demands of a firm such as the need for service providers with in-depth firm-specific knowledge. We describe related party transactions for a sample of 112 publicly-traded companies, including the types of transactions and parties involved. This paper provides a starting point in related party transactions research.
AB - Transactions between a firm and its own managers, directors, principal owners or affiliates are known as related party transactions. Such transactions, which are diverse and often complex, represent a corporate governance challenge. This paper initiates research in finance on related party transactions, which have implications for agency literature. We first explore two alternative perspectives of related party transactions: the view that such transactions are conflicts of interest which compromise management's agency responsibility to shareholders as well as directors' monitoring functions; and the view that such transactions are efficient transactions that fulfill rational economic demands of a firm such as the need for service providers with in-depth firm-specific knowledge. We describe related party transactions for a sample of 112 publicly-traded companies, including the types of transactions and parties involved. This paper provides a starting point in related party transactions research.
UR - http://www.scopus.com/inward/record.url?scp=36148967308&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=36148967308&partnerID=8YFLogxK
U2 - 10.1016/S1569-3732(04)09001-2
DO - 10.1016/S1569-3732(04)09001-2
M3 - Chapter
AN - SCOPUS:36148967308
SN - 0762311339
SN - 9780762311330
T3 - Advances in Financial Economics
SP - 1
EP - 27
BT - Corporate Governance
PB - JAI Press
ER -