Related Transactions,Managerial Power And Corporate Irregularities

With the continuous development and expansion of the capital market,more and more frequent violations of the law and regulations of listed companies come into being.There are many shortcomings in the operation and governance of Listed Companies in China.So it’s a long way to prevent the listed companies’ illegal behaviors and protect the interests of investors.Therefore,it is of great significance to explore the influencing factors and mechanisms of corporate violations to understand and supervise corporate violations.Related party transactions are common and inevitable in listed companies.The affiliated transaction process is complex and the price is easy to be manipulated by both parties.It has certain concealment in the process and information disclosure,so it’s easy to become a tool for senior managers to manipulate corporate performance and increase the risk of violation.Therefore,it is possible to study the impact of the related party transactions on the business infractions.The senior managers engage in actual operation of the company,master the management right of the enterprise,and influence the development strategy and direction of the enterprise.As the direct perpetrators of violations,the power and the motivation of senior managers will also significantly affect corporate violations.When managers conduct performance manipulation and selective disclosure of information for their own purposes,the risk of violation will be increased.With the strengthening of executive power,this kind of agency problem will be worse.This paper makes an analysis of the current situation of the violation of regulations of Listed Companies in China from 2008 to 2017.The analysis finds that the total number of violations by Listed Companies in China is relatively large,with 2012 as the dividing point,showing a trend of fluctuation and decline after the overall rise,which is related to the construction of multi-level regulatory system in China.There are many types of irregularities in listed companies,and many types of irregularities often occur together.The most frequent types of irregularities are accounting treatment irregularities and information disclosure irregularities.Comparing with the current situation of enterprise violation,the punishment of enterprise violation in China needs to be further strengthened.This paper selected Chinese A-share listed companies from 2010 to 2017 as the research object,to explore the impact of related party transactions on corporate irregularities,and the role of managerial power in them.This paper also studies the impact of different types of irregularities and different directions of related transactions,and conducts a further analysis according to internal control quality and analyst attention.The study found that there is a significant positive correlation between the incidence and degree of corporate irregularities and related party transactions.The higher the level of related party transactions,the higher the possibility of corporate irregularities.Managerial power plays a promoting role in the relationship between related party transactions and corporate irregularities.The inflated power of senior executives will increase the positive correlation of related party transactions to corporate irregularities,which indicates that senior executives with high power may commit violations through related party transactions.This paper also found that compared with enterprises with high internal control quality,enterprises with low internal control quality are more likely to violate the rules by related party transactions,and the expansion of managerial power will increase the positive correlation,making related party transactions more likely to become a tool for executives to grab personal gains.Compared with enterprises with high analysts’ attention,enterprises with less analysts’ attention are more likely to violate the rules by using related party transactions,and senior executives are more likely to use related transactions to achieve private goals.Finally,some suggestions are put forward based on the research results.On the basis of previous studies,this paper adds personal characteristics such as major,education background and tenure of senior executives to the measurement dimension of managerial power,emphasizing the background characteristics of managers.This paper chooses eight dimensions such as the size of the board of directors,the proportion of independent directors,whether the senior executives concurrently serve as directors,executive education,professional management,executive tenure,whether the senior executives hold shares,and whether the senior executives concurrently serve as other companies.This paper used principal component analysis to obtain a comprehensive index,which can measure the influence of managerial power on corporate violations more accurately.This paper connected related transactions,managerial power and corporate irregularities into a research system,which enriches relevant literature on connected transactions,managerial power and corporate irregularities.It provides a new perspective and empirical evidence for the research on the influencing factors of corporate violations,and has certain positive significance for promoting the construction of senior management team and improving the level of management team.The conclusions and suggestions of this paper are helpful to improve the understanding of the influencing factors and governance mechanism of irregularities of Chinese listed companies.This paper can provide important practical enlightenment for securities regulatory authorities to strengthen supervision and listed companies to reduce irregularities.