Sensitivity of Investment and Financing to the Performance, with an Emphasis on Related Party Transaction

Document Type : Original Article

Authors

1 Asistance Prof in Accounting, Department of accounting, Hashtrood Branch, Islamic Azad University, Hashtrood, Iran

2 Associate Professor, Shahid Chamran University of Ahvaz, Ahvaz, Iran

3 MSc in accounting, Islamic Azad University, Marand Branch.

10.22034/iaar.2022.162389

Abstract

Related party transactions from view of opportunistic behavior or efficiency can affect optimal allocation of resources in form of investment and financing in response to reported performance. The purpose of this study is to investigating the sensitivity of investment and financing to the company's performance, with an emphasis on related party transactions role in companies listed in Tehran Stock Exchange. The research sample includes 98 companies listed in Tehran Stock Exchange for the period of 2010 to 2018. The present research in terms of purpose is applied research using the post-event approach. The results showed that investment and external financing sensitivity to performance i.e. Q is not affected by related party transactions, but investment sensitivity to internal cash flow, increases with related party transactions increasing. While the external financing sensitivity to internal cash flow has been moderated and decrease by the related party transactions increasing. Which reflects the opportunistic perception of related party transactions by companies’ investors and creditors.

Keywords

Accounting and Auditing Research
Volume 14, Issue 55
September 2022
Pages 5-20

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