Related-party transactions and financial statement comparability: evidence from South Korea

Myung Gun Lee, Minjung Kang, Ho Young Lee, Jong Chool Park

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)


This study examines the association between related-party transactions (RPTs, hereafter) and comparability of accounting information. We posit that comparability decreases with RPTs where much management discretion is likely to be involved in determining volume and terms. In addition, firms conducting RPTs are more likely to make accounting choices which make their accounting information less comparable to their industry peers to prevent government detection of illegal RPTs. Using a unique data-set on RPTs among firms listed on the Korean stock market, we provide evidence consistent with our prediction. Specifically, by defining three different measures of annual RPTs; (1) size of RPTs, (2) volatility of RPTs, and (3) size of non-cash RPTs, we find that financial statement comparability decreases as RPTs increase for all three measures of RPTs. Additional analyses show that the negative association is more pronounced in abnormal RPTs than the predicted RPTs and less pronounced in operating RPTs than non-operating RPTs.

Original languageEnglish
Pages (from-to)224-252
Number of pages29
JournalAsia-Pacific Journal of Accounting and Economics
Issue number2
Publication statusPublished - 2016 Apr 2

Bibliographical note

Publisher Copyright:
© 2014 City University of Hong Kong and National Taiwan University.

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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