Identifying Motives of Related Party Transactions

This article investigates motives of Related Party Transactions using the Moscariello model. There are two contrasting theories، conflict of interests vs. efficient transactions hypothesis، describing the reasons behind RPTs. Up to now، there are no empirical evidence to show a definite picture of motives for related party transactions. If there is an opportunistic behavior، there should be special relations between the extent of RPTs and market variables including ownership concentration level، market value to book value ratio، and corporate governance variables including board size، percentage of nonexecutive board members، Duality، and leverage. The sample is a number of firms listed in Tehran Stock Exchange over the years of 2006 to 2010. Test of hypothesis shows that there are meaningful expected relations between the extent of RPT and ownership concentration level، percentage of nonexecutive board members، and leverage. The findings approve the hypothesis that an opportunistic behavior exists in related party transactions in Iranian business environment.