Correlation Research Of Listed Companies Between Related Party Trasanction And Earnings Quality In The View Of The New Accounting Standards

Related party transactions has two sides, which can not only benefit the listed companiesto take advantage of the internal market resources, improve operational efficiency, but alsocould provide the listed companies opportunities to manipulate the financial report, to destroyof the interests of investors and creditors. Therefore, it is far-reaching social significance andeconomic significance to standardize the related party transactions in listed companies in China,to ensure that listed companies do conduct open, fair and equitable and to provide valuableinformation on investment decisions to the majority of investors.After two decades of development, China’s respective laws and regulations associatedwith the related party transactions have been gradually improved. They can regulate relatedparty transactions in providing a clear relationship between the related parties, promoting thefair pricing of related party transactions, and improving the occur procedures for related partytransactions and also improving the quality of related party transactions disclosure. However,by comparing the regulation of foreign related party transactions, we found that in China theregulation of related party transactions is low in both legislative level and legal effect. Andthe accountability system is imperfect, legal conflicts exist, while information disclosuresystem still need improvement.In this paper, we use data of the listed companies from2007to2010for the sample ofrelated party transactions. Study the status of related party transactions and its relationship withearnings quality. The results show that: first, related party transactions show the followingcharacteristics: View from the source of related party transactions, related party transactionsconcentrated in products trading, financial transactions, guarantee and mortgage, and debtpayment. From the industry point of view, manufacturing industries was the largest weightratio of related party transactions, accounting for about63%. View from the objects of therelated party transactions, the listed company’s related party transactions with the parentcompany is of the largest, accounting for about39%. Secondly, related party transactionssignificantly affected earnings quality, the proportion of related-party transactions negativelycorrelated with earnings persistence. The reason is related-party transactions have beenalienated as hollowing out tools and means of listed companies, markets and other investorsused "voting with their feet" means with related party transactions, resulting in related party transactions affect the earnings quality of listed companies. Finally, the degree of related partytransactions impact on earnings quality of the listed companies, which occurred related partytransactions with their controlling shareholders, is higher compared with those did not occurrelated party transactions with controlling shareholders. And related party transactions, whichhappen between listed companies and the controlling shareholders, compare with thosebetween listed companies and other companies, the greater the proportion, the lower theearnings quality. Therefore, the regulatory authorities should consider pre-established relatedtrading guidelines and regulations, change post-regulation turning into prior guidance, whilestrengthening and improving the system of regulations and guidelines.Referring to foreign regulatory experiences related party transactions, we believe that toregulate related party transactions in listed companies in China, it is necessary to strengtheninformation disclosure regulation, regulate the disclosure of related party transactions andresponsibility investigation, optimize ownership structure, and improve the corporategovernance structure of listed companies, and also enhance the construction of accountingstandards, making the norms of related-party transactions into the legal system.