Buying inferior to selling: Explore the impact of transaction direction on the effects of related-party transactions
Shuang Li, Jie He
TL;DR
This paper explores how the direction of related-party transactions affects their impact on corporate profits and governance.
Contribution
The paper introduces the 'buying inferior to selling' theory and a new indicator, the quasi-profit margin, to assess related-party transaction effects.
Findings
Related-party transactions in Chinese A-share companies generally exhibit a tunneling effect.
The transaction direction significantly influences the effects of related-party transactions.
Higher seller proportion in RPTs reduces the overall tunneling effect.
Abstract
Throughout, the effects of related-party transactions (RPTs) have been a hot topic in financial markets and corporate governance research. This paper analyzes the theoretical foundation of the effects of RPTs and constructs a new indicator, the quasi-profit margin, to assess the effects of RPTs by studying their impact on the quasi-profit margin. Based on the information asymmetry between transaction parties and the information screening theory, the paper proposes the buying inferior to selling theory, systematically explaining the impact of transaction direction on the effects of RPTs. Subsequently, using panel data from Chinese A-share listed companies from 2016 to 2021, the paper constructs fixed-effects models and conducts empirical studies from both exogenous and endogenous perspectives, employing estimation methods such as high dimensional fixed effects method, two-stage least…
Genes, proteins, chemicals, diseases, species, mutations and cell lines named across the full text — each resolved to its canonical identifier and authoritative record.
Click any figure to enlarge with its caption.
Figure 1
Figure 2
Figure 3
Figure 4
Figure 5
Figure 6
Figure 7
Figure 8
Figure 9
Figure 10
Figure 11
Figure 12
Figure 13
Figure 14
Figure 15
Figure 16
Figure 17
Figure 18
Figure 19
Figure 20Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
Taxonomy
TopicsCorporate Finance and Governance · Auditing, Earnings Management, Governance · Working Capital and Financial Performance