Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Accounting, Economics, and Law: A Convivium

Ed. by Avi-Yonah, Reuven S. / Biondi, Yuri / Sunder, Shyam

See all formats and pricing
More options …

Disclosure on Related Party Transactions: Evidence from Italian Listed Companies

Fabrizio Bava / Melchiorre Gromis di Trana
  • Corresponding author
  • Department of Management, University of Turin, C.so Unione Sovietica 218 bis, 10134 Turin, Italy
  • Email
  • Other articles by this author:
  • De Gruyter OnlineGoogle Scholar
Published Online: 2015-04-28 | DOI: https://doi.org/10.1515/ael-2014-0020


Recent shortcomings in corporate affairs, related to the bursting of the New Economy Bubble and the global financial crisis, have forced regulators to strengthen current rules introducing new bans and requirements, aimed at guaranteeing the substantial and economic fairness of related party transactions (RPTs). In 2010 rules regarding RPTs were completely reshaped by the Italian Regulatory Body for the Italian Stock Exchange (CONSOB Regulation no. 17221). One of the most important amendments regarded the change in the criteria by which RPTs are mandatorily disclosed to investors. This change replaces a selection process based on a qualitative with a quantitative approach, in order to reduce the subjectivity of this particular evaluation. This study aims to analyze the effectiveness of the disclosure of RPTs after the introduction of the new rules. Our results show that although the new rules contribute to increasing the amount of information disclosed to investors through a higher number of documents reported by companies, their percentage in relation to the overall amount is worryingly low.

Keywords: related party transactions; disclosure; transparency; quantitative criteria


  • Assonime. (2011). Analysis of the compliance with the Italian Corporate Governance Code: year 2010 Rome.

  • Bava, F., & Devalle, A. (2012). Is the “new” Parmalat model of corporate governance a best practice in Italy? Procedia Economics and Finance, 2, 81–90.Google Scholar

  • Beak, J. S., Kang, J. K., & Lee, I. (2006). Business groups and tunneling: Evidence from private securities offering by Korean Chaebols. Journal of Finance, 61, 2415–2449.CrossrefGoogle Scholar

  • Beasley, M., Carcello, J., & Hermanson, D. (2001). Top 10 audit deficiencies – SEC sanctions. Journal of Accountancy, 191(4), 63–37.Google Scholar

  • Bell, T., & Carcello, J. (2000). A decision aid for assessing the likelihood of fraudulent financial reporting. Auditing: A Journal of Practice and Theory, 19(1), 169–184.Google Scholar

  • Berkman, H., Cole, R. A., & Fu, L. J. (2009). Expropriation through loan guarantees to related parties: Evidence from China. Journal of Banking and Finance, 33, 141–156.Google Scholar

  • Bhagat, S., & Bolton, B. (2008). Corporate governance and firm performance. Journal of Corporate Finance, 14, 257–273.CrossrefGoogle Scholar

  • Bianchi, M., & Bianco, M. (2006). Italian corporate governance in the last 15 years: From pyramids to coalitions? ECGI Finance Working Paper, No. 144/2006.

  • Bianchi, M., Bianco, M., & Enriques, L. (2010, January 19). Pyramidal groups and the separation between ownership and control in Italy. In F. Barca & M. Becht (Eds.), The control of corporate Europe (pp. 154–186). Oxford: Oxford University Press.Google Scholar

  • Biondi, Y. (2005). The firm as an entity: Management, organization, accounting. Università degli Studi di Brescia Working Paper No. 46. Retrieved from http://ssrn.com/abstract=774764

  • Biondi, Y. (2012). What do shareholders do? Accounting, ownership and the theory of the firm: Implications for corporate governance and reporting. Accounting, Economics and Law: A Convivium, 2(2). Retrieved from http://ssrn.com/abstract=2089771Google Scholar

  • Cernat, L. (2004). The emerging European corporate governance model: Anglo-Saxon, continental, or still the century of diversity? Journal of European Public Policy, 11(1), 147–166.CrossrefGoogle Scholar

  • Chalmers, K. (2001). The progression from voluntary to mandatory derivative instrument disclosures – look who’s talking. Australian Accounting Review, 11(23), 34–44.CrossrefGoogle Scholar

  • Chalmers, K., & Godfrey, J. M. (2004). Reputation costs: The impetus for voluntary derivative financial instrument reporting. Accounting, Organizations and Society, 29(2), 95–125.Google Scholar

  • Chen, I. J. (2014). Financial crisis and the dynamics of corporate governance: Evidence from Taiwan’s listed firms. International Review of Economics & Finance, 32, 3–28.CrossrefGoogle Scholar

  • Chen, C. W. K., Chen, Z., & Wei, J. K. C. (2009). Legal protection of investors, corporate governance, and the cost of equity capital. Journal of Corporate Finance, 15, 273–289.CrossrefGoogle Scholar

  • Chen, C. W. K., & Yuan, H. Q. (2004). Earning management and capital resource allocation: Evidence from China’s accounting‐based regulation of rights issue. Accounting Review, 79(3), 645–665.CrossrefGoogle Scholar

  • Chen-Wen, C., & Chinshun, W. (2007). Related party transactions and ownership concentration: Theory and evidence. Retrieved from http://www.g-casa.com/conferences/singapore/papers_in_pdf/wed/Chen.pdf

  • Cheung, Y. L., Jing, L., Lu, T., Rau, P. R., & Stouraitis, A. (2009). Tunneling and propping up: An analysis of related party transactions by Chinese listed companies. Pacific-Basin Finance Journal, 17(3), 372–393.Google Scholar

  • Chung, R., Firth, M., & Kim, J. B. (2002). Institutional monitoring and opportunistic earnings management. Journal of Corporate Finance, 8, 29–48.CrossrefGoogle Scholar

  • Clarke, T. (2013). Deconstructing the mythology of shareholder value: A comment on Lynn Stout’s the shareholder value myth. Convivium. doi: Crossref

  • Consob (2008). Second consultation paper on the regulation of related party transactions. www.consob.it

  • Corlacio, A., & Tudor, A. T. (2011). Related parties transactions – Overview. Annales Universitatis Apulensis Series Oeconomica, 13(2), 241–248.Google Scholar

  • Denis, D., & McConnell, J. J. (2003). International corporate governance. Journal of Financial and Quantitative Analysis, 38, 1–36.CrossrefGoogle Scholar

  • Dyck, A., & Zingales, L. (2004). Private benefits of control: An international comparison. The Journal of Finance, 59(2), 537–600.CrossrefGoogle Scholar

  • Eisenhardt, K. M. (1989). Agency Theory: An Assessment and Review. The Academic of Management Review, 14(1), 57–74.Google Scholar

  • Emshwiller, J. R. (2003). Many companies report transactions with top officers. Wall Street Journal, A1.

  • Erickson, M., Mayhew, B., & Felix, W. L. (2000). Why do audits fail? Evidence from Lincoln savings and loan. Journal of Accounting Research, 38, 165–194.CrossrefGoogle Scholar

  • Fama, E. F. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88, 715–732.CrossrefGoogle Scholar

  • Fama, E. F., & Jensen, M. C. (1983a). Agency problems and residual claims. Journal of Law and Economics, 26, 327–335.Google Scholar

  • Fama, E. F., & Jensen, M. C. (1983b). Separation of ownership and control. Journal of Law and Economics, 26, 301–325.Google Scholar

  • Ferrarini, G., & Giudici, P., (2005). Financial scandals and the role of private enforcement: The Parmalat case ECGI Law Working Paper, No. 40/2005.

  • Fooladi, M., & Shukor, Z. A. (2011). Corporate governance and disclosure of related party transactions (March 15, 2011). In 2nd international conference on business and economic research (2nd ICBER 2011), Langkawi, Malaysia, 14–16 March 2011. Retrieved from http://ssrn.com/abstract=2259539

  • Gordon, E. A., Henry, E., Louwers, T. J., & Reed, B. J. (2007). Auditing related party transactions: A literature overview and research synthesis. Accounting Horizons, 21, 81–102.CrossrefGoogle Scholar

  • Gordon, E. A., Henry, E., & Palia, D. (2004). Related party transactions and corporate governance. Advances in Financial Economics, 9, 1–27.Google Scholar

  • Goshen, Z. (2003). The efficiency of controlling corporate self-dealing: Theory meets reality. California Law Review, 91(2), 393–438.CrossrefGoogle Scholar

  • Gromis di Trana, M. (2014). Le parti correlate nell’economia d’azienda. Giuffrè, Fiuffré Editore: Milano.Google Scholar

  • Grossman, S., & Hart, O. (1980). Takeover bids, the free-rider problem, and the theory of the corporation Bell. Journal of Economics, 11, 42–64.Google Scholar

  • Henry, E., Gordon, E. A., Reed, B. J., & Louwers, T. J. (2007). The role of related party transactions in fraudulent financial reporting. Retrieved from http://ssrn.com/abstract=993532

  • Hofstede, G. (1980). Culture and organizations. International Studies of Management & Organization, 15–41.

  • Holderness, C. G. (2009). The myth of diffuse ownership in the United States. Review of Financial Studies, 22(4), 1377–1408.CrossrefGoogle Scholar

  • Hwang, N. C. R., Chiou, J. R., & Wang, Y. C. (2013). Effect of disclosure regulation on earnings management through related-party transactions: Evidence from Taiwanese corporations operating in China. Journal of Accounting and Public Policy, 32(4), 292–313.CrossrefGoogle Scholar

  • Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.CrossrefGoogle Scholar

  • Jian, M., & Tak, J. W. (2010). Propping through related party transactions. Review of Accounting Studies, 15(1), 70–105.CrossrefGoogle Scholar

  • Johnson, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2000). Tunneling. American Economic Review, 90(2), 22–27.CrossrefGoogle Scholar

  • Khanna, T., & Palepu, K. (1997). Why focused strategies may be wrong for emerging markets. Harvard Business Review, 75(4), 41–51.Google Scholar

  • Kohlbeck, M., & Mayhew, B. (2005). Related party transactions American Accounting Association. FARS Meeting Paper.

  • Kohlbeck, M., & Mayhew, B. W. (2010). Valuation of firms that disclose related party transactions. Journal of Accounting and Public Policy, 29(2), 115–137.CrossrefGoogle Scholar

  • Kun, C. X. W. (2005). Related party transactions, corporate governance and state ownership reform. Economic Research Journal, 4, 7.Google Scholar

  • La Porta, R., Florencio Lopez-de-Silanes, A. S., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106, 1113–1155.CrossrefGoogle Scholar

  • La Porta, R., Lopez-de-Silanesb, F., Shleifera, A., & Vishnyc, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1–2), 3–27.CrossrefGoogle Scholar

  • Lemmon, M. L., & Lins, K. V. (2003). Ownership structure, corporate governance, and firm value: Evidence from the East Asian financial crisis. The Journal of Finance, 58(4), 1445–1468.CrossrefGoogle Scholar

  • Leuz, C., & Verrecchia, R. E. (2000). The economic consequences of increased disclosure. Journal of Accounting Research, 38, 91–124.CrossrefGoogle Scholar

  • Liu, Q., & Lu, Z. (2007). Corporate governance and earnings management in the Chinese listed companies: A tunneling perspective. Journal of Corporate Finance, 13(5), 881–809.CrossrefGoogle Scholar

  • Lo, A. W., Wong, R. M., & Firth, M. (2010). Can corporate governance deter management from manipulating earnings? Evidence from related-party sales transactions in China. Journal of Corporate Finance, 16(2), 225–235.CrossrefGoogle Scholar

  • Melis, A. (2005). Corporate governance failures: To what extent is Parmalat a particularly Italian Case? Corporate Governance: An International Review, 13, 478–488. doi: CrossrefGoogle Scholar

  • Munir, S. (2010). Related party transactions, family ownership and earnings quality: A study of Malaysian firms. Symposium Journol of Contemporary Accounting and Economics, 1–46.

  • Munir, S., & Gul, R. J. (2010). Related party transactions, family firms and firm performance: Some Malaysian evidence (April 13, 2010). Finance and corporate governance conference 2011 paper. Retrieved from http://ssrn.com/abstract=1705846 or http://dx.doi.org/10.2139/ssrn.1705846Crossref

  • Nenova, T. (2003). The value of corporate voting rights and control: A cross-country analysis. Journal of Financial Economics, 68(3), 325–351.CrossrefGoogle Scholar

  • OECD. (2012). Related party transactions and minority shareholder rights publishing. Retrieved from http://dx.doi.org/10.1787/9789264168008-enCrossref

  • Pan, T., & Hsiu-Cheng W. (2007). A study on the relationship between the policy of banks’ loan interest Rate and Related party transactions MA. Taiwan: Department of Finance, National Yunlin University of Science and Technology.Google Scholar

  • Park, Y., & Shin, H. (2004). Board composition and earnings management in Canada. Journal of Corporate Finance, 10, 431–457.CrossrefGoogle Scholar

  • Pizzo, M. (2013). Related party transactions under a contingency perspective. Journal of Management and Governance, 172, 309–330.CrossrefGoogle Scholar

  • Pozzoli, M., & Venuti, M. (2014). Related party transactions and financial performance: Is there a correlation? Empirical evidence from Italian listed companies. Open Journal of Accounting, 3, 28–37. doi: CrossrefGoogle Scholar

  • Rezaee, Z. (2004). Corporate governance role in financial reporting. Research in Accounting Regulation, 17, 107–149.Google Scholar

  • Ryngaert, M. D., & Shawn, T. E. (2011). Not all related party transactions (RPTs) are the same: Ex-ante vs. ex-post RPTs. Journal of Accounting Research.

  • Stevelman, F. (2013). Now you see it, now you don’t: Myths about shareholder value. Convivium. doi: Crossref

  • Stout, L. (2013a). The troubling question of corporate purpose. Accounting, Economics and Law, 3(1), 61–70.Google Scholar

  • Stout, L. (2013b, April 1). The shareholder value myth. European Financial Review. April–May 2013. Retrieved from http://ssrn.com/abstract=2277141

  • Swartz, M., & Watkins, S. (2003). Power failure: The inside story of the collapse of Enron. New York: Doubleday.Google Scholar

  • Tague, M. (2004). Secret of the vault. Barons 13.

  • Taylor, D., & Darus, F. (2006). Mandatory disclosure’s impact on voluntary disclosure of proprietary information: Evidence from introduction of financial instruments disclosure standard. In Paper presented at the international conference on accounting and finance in transition (ICAFT), University of South Australia, 2006, 10–11 April.

  • Weinstein, O. (2013). The shareholder model of the corporation, between mythology and reality. Convivium, 3, 43–60.Google Scholar

  • Wong, T. J., & Ming, J. (2003). Earnings management and tunneling through related party transactions: Evidence from Chinese corporate groups. EFA 2003 Annual Conference Paper No. 549. Retrieved from http://ssrn.com/abstract=424888

  • Yeh, Y. H., Shu, P. G., & Su, Y. H. (2012). Related-party transactions and corporate governance: The evidence from the Taiwan stock market. Pacific-Basin Finance Journal, 20(5), 755–776.Google Scholar

  • Yi Lin, W., Liu, Y. A., & Keng, I. (2010). Related party transactions, firm performance and control mechanisms: Evidence from Taiwan. International Research Journal of Finance and Economics, 35, 82–98.Google Scholar

  • Young, B. (2005). Related-party transactions: Why they matter and what is disclosed. Corporate governance advisor. 13, 1–7.

  • Zengquan, L., Sun, Z., & Wang, Z. (2004). Tunneling and ownership structure of a firm: Evidence from controlling shareholder’s embezzlement of listed company’s funds in China. Accounting Research, 12, 3–13.Google Scholar

About the article

Published Online: 2015-04-28

Published in Print: 2016-07-01

Citation Information: Accounting, Economics and Law: A Convivium, Volume 6, Issue 2, Pages 119–150, ISSN (Online) 2152-2820, ISSN (Print) 2194-6051, DOI: https://doi.org/10.1515/ael-2014-0020.

Export Citation

©2016 by De Gruyter.Get Permission

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

Roberto Maglio, Andrea Rey, Francesco Agliata, and Rosa Lombardi
Corporate Social Responsibility and Environmental Management, 2020, Volume 27, Number 1, Page 272
Fabrizio Bava, Melchior Gromis di Trana, Donatella Busso, and Piero Pisoni
FINANCIAL REPORTING, 2018, Number 1, Page 5

Comments (0)

Please log in or register to comment.
Log in