{"title":"Related party transactions and earnings management under the UK different regulatory environments of the main and alternative investment markets","authors":"Mohammad Alhadab , Malek El Diri","doi":"10.1016/j.intaccaudtax.2024.100640","DOIUrl":null,"url":null,"abstract":"<div><p>Beyond the recent research on related party transactions (RPTs), we study the impact of regulatory environment on RPTs and earnings management. Using a sample of United Kingdom (UK) public firms listed on the lightly regulated Alternative Investment Market (AIM) and the heavily regulated Main Market (Main) of the London Stock Exchange, we find evidence that firms on the Main Market use more efficient and less opportunistic RPTs than those in the AIM market. In addition, efficient RPTs are used as a substitute for the costly real earnings management in the Main Market. Our findings support the efficient contracting hypothesis under the stricter regulation of the Main Market which reduces information asymmetry and enhances internal resource optimization. Our results are robust controlling for endogeneity and selection bias problems.</p></div>","PeriodicalId":53221,"journal":{"name":"Journal of International Accounting Auditing and Taxation","volume":null,"pages":null},"PeriodicalIF":3.3000,"publicationDate":"2024-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of International Accounting Auditing and Taxation","FirstCategoryId":"1085","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1061951824000466","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Beyond the recent research on related party transactions (RPTs), we study the impact of regulatory environment on RPTs and earnings management. Using a sample of United Kingdom (UK) public firms listed on the lightly regulated Alternative Investment Market (AIM) and the heavily regulated Main Market (Main) of the London Stock Exchange, we find evidence that firms on the Main Market use more efficient and less opportunistic RPTs than those in the AIM market. In addition, efficient RPTs are used as a substitute for the costly real earnings management in the Main Market. Our findings support the efficient contracting hypothesis under the stricter regulation of the Main Market which reduces information asymmetry and enhances internal resource optimization. Our results are robust controlling for endogeneity and selection bias problems.
期刊介绍：
The Journal of International Accounting, Auditing and Taxation publishes articles which deal with most areas of international accounting including auditing, taxation and management accounting. The journal''s goal is to bridge the gap between academic researchers and practitioners by publishing papers that are relevant to the development of the field of accounting. Submissions are expected to make a contribution to the accounting literature, including as appropriate the international accounting literature typically found in JIAAT and other primary US-based international accounting journals as well as in leading European accounting journals. Applied research findings, critiques of current accounting practices and the measurement of their effects on business decisions, general purpose solutions to problems through models, and essays on world affairs which affect accounting practice are all within the scope of the journal.
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