Related Party Transactions,Internal Controls And Transaction Costs

Related party transaction is a very common economic behavior in enterprises,which has aroused strong attention from all sides.Because of the unique attributes of related party transactions and the unique development history in China,related party transactions have become a hot spot and focus in China’s capital market.Related party transaction is a double-edged sword with both advantages and disadvantages.However,from the perspective of previous research,many scholars focus on the negative economic impact of related transactions compared with its positive effects.Based on the Theory of Transaction Cost,this paper takes related sales as the variable of related transaction and sales expense as the variable of transaction cost,exploreing the mechanism of the influence of related transaction on transaction cost,and further discussing the mechanism of internal control and other regulating variables.The study helps,on the one hand,to enrich the positive consequences of related party transactions,making stakeholders in perspective have a corrcet understanging of the role of related party transactions,on the other hand,to provide some referential suggestions about perfecting the internal control system.This paper adopts the method of combining theoretical analysis,empirical analysis and case analysis.Firstly,the existing research results of related transaction and internal control are summarized and sorted out.Then,based on related theories of related party transactions and the influencing factors of transaction costs,theoretical hypotheses are proposed.Then,using the method of empirical research,Chinese listed a-share companies from 2008 to 2016 as the research samples are selected to explore the influence of related transaction level of enterprises on transaction cost.Furthermore,after introducing a series of regulatory variables related to corporate governance,such as internal control,market index,external investors and property rights,the influence degree of the existence of regulating variable on related transaction and transaction cost are explored.Finally,Baoshan Iron & Steel Co.,Ltd.and Xinjiang Ba Yi Iron And Steel Co.,Ltd,both of which belong to ferrous metal smelting and rolling industry,are selected as cases to further verify the empirical conclusions by analyzing and comparing relevant indicators.It is found that the larger the scale of related sales and related purchase and sale is,the lower the transaction cost represented by sales expense and sales management expense is.At the same time,internal control has a positive regulatory effect,the higher the quality of internal control is,the greater the impact of related sales on the reduction of sales expenses is.The empirical conclusion passed the robustness test.Further research shows that the marketization process has a significant regulatory effect.The more developed the regional marketization process is,the stronger the negative correlation of related transactions to transaction costs is;but in the process of low marketization,the regulatory role of internal control is stronger.The shareholding ratio of external investors also has a positive regulatory mechanism for the correlation between related transactions and transaction costs.The nature of property rights also plays a regulatory role.Non-state-owned enterprises are more likely to reduce sales costs through related sales,while state-owned enterprises with perfect internal control are more likely to carry out related sales in order to reduce sales costs.Finally,through the analysis of Baoshan Iron & Steel Co.,Ltd.and Xinjiang Ba Yi Iron And Steel Co.,Ltd,this paper further verifies the conclusion that connected transactions can reduce transaction costs and the regulatory role of internal control.Based on the results of the above empirical research and case study,this paper puts forward relevant research suggestions.First of all,related stakeholders of enterprises should treat related transactions in a correct way.Connected transactions may have both positive and negative effects on enterprises,but the overall performance is efficiency promotion.Secondly,the internal control system of enterprises should be standardized so as to regulate related party transactions.Finally,the corporate governance mechanism should be strengthened.In the region,the marketization level should be improved and the proportion of external investors should be increased on the enterprises,so as to further promote the positive effect of related party transactions.The innovation points of this paper mainly focus on the innovation of cases and regulatory variables,but there are also limitations and shortcomings,mainly reflected in the definition of transaction costs and the accuracy of the disclosure of related transactions by enterprises.