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Discussion of “are related party transactions red flags?”

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  • Jorgensen, Bjorn N.
  • Morley, Julia

Abstract

Kohlbeck and Mayhew (2017) create a new data set featuring two types of related party transactions. They use empirical-archival methods to investigate the effect of such transactions on the likelihood of restatements and on audit fees. Their findings suggest that related party transactions related to directors, officers and major shareholders are associated with poor “tone at the top” and that this leads management to negotiate for lower-quality audits to minimize monitoring costs. To offer avenues for future research, we focus our discussion on three aspects of their paper related to causality, definitions of variables, and generalizability to non-U.S. jurisdictions.

Suggested Citation

  • Jorgensen, Bjorn N. & Morley, Julia, 2017. "Discussion of “are related party transactions red flags?”," LSE Research Online Documents on Economics 80801, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:80801
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    File URL: http://eprints.lse.ac.uk/80801/
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    Cited by:

    1. Lioara-Veronica Pasc & Camelia-Daniela Hațegan, 2020. "Related Parties’ Transactions: A Literature Overview on Auditor’s Risk," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1021-1030, December.

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    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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