Title: Does corporate governance play a dynamic role in mitigating opportunistic transactions? Evidence from India

Authors: Nitya Nand Tripathi; Asha Binu Raj; Sudhakara Reddy Syamala; Aviral Kumar Tiwari

Addresses: The ICFAI Foundation for Higher Education (IFHE) (Deemed to be University), Room no. F111, IBS Hyderabad, Dontanapally Campus, Shankerpally Road, Hyderabad, Telangana, 501203, India ' National Institute of Bank Management (NIBM), NIBM Post Office, Kondhwa Khurd, Pune – 411 048, Maharashtra, India ' Department of Finance, Indian Institute of Management, Calcutta, Diamond Harbour Rd, Joka, Kolkata, West Bengal 700104, India ' Indian Institute of Management Bodh Gaya, Bodh Gaya, India

Abstract: This paper investigates the effect of corporate governance mechanism on various types of related party transactions (RPTs) in India. We examine whether the corporate governance mechanism helps to restrict the management's opportunistic behaviour of transferring resources from the company through RPTs or not. We find that the percentage of related party sales to total assets is between 6.4%-37.98% and the percentage of related party expenses to total assets is in the range of 4.4%-25.30% during the study period. Whereas, the percentage of loans given to related parties to total assets is between 5.0% to 26.0% and loans taken from related parties to total assets is 3.9% to 22.70%. The empirical findings show a negative relation between independent directors and RPTs. The findings can strategically facilitate the regulators to make necessary decisions which could strengthen the corporate governance mechanism to mitigate opportunistic transactions in terms of RPTs.

Keywords: corporate governance; related party transactions; audit committee; opportunistic transactions; corporate governance index; CGI; India.

DOI: 10.1504/IJEPEE.2025.147477

International Journal of Economic Policy in Emerging Economies, 2025 Vol.22 No.1, pp.25 - 51

Received: 17 Feb 2021
Accepted: 22 Jul 2021
Published online: 18 Jul 2025 *

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