Title: The effects of related party transactions on firm performance: empirical evidence from Malaysia

Authors: Mohd Taufik Mohd Suffian; Zuraidah Mohd-Sanusi; Mohd Zulfikri Abd Rashid; Mohd Soffi Puteh; Zulkifli Mohd Ghazali

Addresses: Faculty of Accountancy, Universiti Teknologi MARA (UiTM), Perak Branch, Tapah Campus, 35400 Tapah Road, Perak, Malaysia ' Accounting Research Institute (ARI), Universiti Teknologi MARA (UiTM), Selangor Branch, Shah Alam Campus, 40450 Shah Alam, Selangor, Malaysia ' Faculty of Accountancy, Universiti Teknologi MARA (UiTM), Perak Branch, Tapah Campus, 35400 Tapah Road, Perak, Malaysia ' Faculty of Accountancy, Universiti Teknologi MARA (UiTM), Perak Branch, Tapah Campus, 35400 Tapah Road, Perak, Malaysia ' Faculty of Computer and Mathematical Sciences, Universiti Teknologi MARA (UiTM), Perak Branch, Tapah Campus, 35400 Tapah Road, Perak, Malaysia

Abstract: Related party transactions are a common business activity with such transactions taking place in firms that have never been implicated in accounting and financial fraud. These transactions are integral to sound business exchanges that contribute to a robust financial standing of a firm. However, related party transactions can pose a threat to the performance of a business if the transaction exercises are left unchecked. This study investigated the relationship between related party transactions and firm performance between 2013 and 2017. This specific timeframe was chosen to analyse the effects of MFRS 124 (related party disclosures) on related party transactions since MFRS 124 came into effect on 1st January 2012. According to an analysis of 1,436 firms in a five-year timeframe, there is a significant correlation between related party transactions and how well a business performs. Therefore, it can be deduced that related party transactions constitute an important variable in the performance of Malaysian public listed companies.

Keywords: related party transactions; RPTs; firm performance; return on equity; ROE; Malaysia.

DOI: 10.1504/IJBSR.2022.123945

International Journal of Business and Systems Research, 2022 Vol.16 No.4, pp.469 - 483

Received: 07 Feb 2020
Accepted: 14 Aug 2020
Published online: 05 Jul 2022 *

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