Related Party Transactions, firm value and the effectiveness of the Dutch corporate governance code

The aim of this research is to investigate whether there is a relation between the amount of Related Party Transactions (RPTs), firm value and some firm characteristics. Since RPTs are associated with a risk of expropriation of firms´ resources / fraudulent practising, there may be a negative relation between the amount of RPTs and firm value. This negative relation is already proved by the studies of Cheung et al. (2006), Kolbeck and Mayhew (2010) and Nekhili and Cherif (2011). A high disclosure level might mitigate the negative effect of RPTs on firm value. This study investigated the relation between the amount of RPTs, disclosure level in the field of RPTs and firm value. No significant impact on firm value was found for both the amount of RPTs as disclosure level for the years 2003 as well as 2009. Furthermore, this research investigated which corporate governance and ownership characteristics had a significant impact on the amount of RPTs. A significant positive impact was found for the percentage of ordinary shares of the main shareholder on the amount of RPTs using a ‘normal’ regression, but only for the year 2009. With the panel regression, a significant positive relation was found between being listed in the USA and the amount of RPTs. This positive relation was the reverse of the expected effect. The final part of this research was devoted to the impact of the Dutch corporate governance code on the protection of minority shareholders. No significant decrease of the amount of RPTs was found between the year 2003 and 2009. Also no significant increase was found of disclosure level. Furthermore, the effect (coefficient) of the amount of RPTs and disclosure level on firm value did not decreased respectively increased significantly over time.