The Study on the Using Related Party Transactions in Earnings Management and Tunneling

• Main Authors: Hsin-Hui Peng, 彭馨慧
• Other Authors: Wei-Heng Lin
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/61543590472232532421

碩士 === 中原大學 === 會計研究所 === 95 === This research divides related party transactions into three types according to the nature of relationship between related parties and the reporting entities: non-consolidated without investment relationship, non-consolidated with investment relationship and affiliated companies. Related parties transactions in the consolidated statements are divided into non-investment and investment. The purpose of this study is to examine whether companies use related parties transactions with some specific related parties to engage in earnings management as the company has the earnings management incentive when earnings are lower than the thresholds, and to analyze the market's reaction of related parties sales. We then examine existence of tunneling and the company's market value. The empirical results indicate when company’s earnings are lower than the thresholds, it will increase the related parties sales with non-consolidated non-investment related entities. However, we are unable to infer the response coefficient of non-related parties sales transactions is smaller than that of related parties sales transactions. In tunneling, we are incapable of inferring the money company lends related parties is more than that the company borrows from related parties. It appears the loans is mainly internal market, and when the company accumulate more free cash flow, the net company debits will increase more in the individual of non-consolidated statement which belongs to investment relations. Finally, we are unable to infer related parties loans bring down the market value. The possible explanation is as the company has better performance, it just have the ability to lend related parties money.