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Related Party Transactions and Stock Price Crash Risk: Evidence from India

Author

Listed:
  • Ekta Selarka

    (Assistant Professor, Madras School of Economics)

  • Subhra Choudhury

    (Madras School of Economics)

Abstract

Related Party Transactions disclosures in Annual Reports have recently gained more attention of the Indian policymakers. This paper aims at finding out the effect of related party transactions disclosure on the stock price crash risk faced by the firms. Using a large sample of all the NSE listed firms for the period 2005-2012 this study provides evidence that related party disclosure decreases the stock price crash risk faced by the firms. This study is consistent with the view that information asymmetry increases crash risk. Related party transactions disclosure decreases information asymmetry in the market and thus reduces stock price crash risk. Moreover the study shows that the effect of disclosure about related party transactions is significantly more for higher risk firms.

Suggested Citation

  • Ekta Selarka & Subhra Choudhury, 2015. "Related Party Transactions and Stock Price Crash Risk: Evidence from India," Working Papers 2015-129, Madras School of Economics,Chennai,India.
    • Handle: RePEc:mad:wpaper:2015-129
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    File URL: http://www.mse.ac.in/wp-content/uploads/2016/09/Working-Paper-129.pdf
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    More about this item

    Keywords

    Related party transactions; Stock price crash risk; Ownership structure; India;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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