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- Title
Related Party Transactions and Earnings Management: An Empirical Examination of Selected Companies in India.
- Authors
Rasheed, P. C. Abdul; Mallikarjunappa, T.
- Abstract
A number of publicized accounting frauds around the world, such as Satyam fraud (India), Enron failure (USA), Tyco failure (Ireland), show that firms use Related Party Transactions (RPTs) to manage earnings for financial reporting purposes or to divert firms' resources to their controlling shareholders at the expense of minority shareholders. This study aims to explore the relationship between RPTs and earnings management practices of selected companies in India. The amount of discretionary accruals derived from modified Jones models (Dechow et al., 1995) is used as a proxy to measure earnings management. Based on 218 firm-year observations taken from BSE-200 index based companies for the financial year 2014 and 2015, this study finds that there is a statistically significant relationship between RPTs and earnings management. The findings also reveal that the effect of new RPT regulations in mitigating earnings management is not significant.
- Publication
IUP Journal of Accounting Research & Audit Practices, 2018, Vol 17, Issue 2, p22
- ISSN
0972-690X
- Publication type
Academic Journal