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Related party transactions under a contingency perspective

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  • Michele Pizzo
Abstract
Related party transactions (RPTs) are transfers of resources, services or obligations between a reporting entity and a related party (IASB 2009 ); criteria for a related party definition may significantly differ among the various accounting and governance academic studies and regulatory principles, but they usually depend upon the ability to influ-ence contractual terms and conditions. The topic has been neglected for a long time. In the literature two theories prevail: (a) conflict of interests, considering these dealings as potentially harmful and carried out in the interest of directors; (b) efficient transaction hypothesis, describing them as sound economic exchanges. The paper examines both theories critically through a deductive approach, and also on the basis of their economic rationale. Then, a contingency perspective is suggested, underling how the effectiveness and the efficiency of the proposed solutions are strictly correlated to organizational contexts, institutional environments and governance practices. The study is largely based on a literature review and has different purposes: (a) to shed light on a topic, that, despite its potential impact, has not yet deserved great attention in governance studies; (b) to stress possible inconsistencies in the above mentioned theories, both, to some extent, ideologically biased and unable to offer a proper picture of these heterogeneous dealings; (c) to suggest a more balanced and pragmatic approach, less influ-enced by a suspicious attitude (typical of the conflict of interests theory), possibly more consistent with their economic rationale (as suggested by the efficient transactions hypothesis) as well as social fac-tors and governance practices. Copyright Springer Science+Business Media, LLC. 2013

Suggested Citation

  • Michele Pizzo, 2013. "Related party transactions under a contingency perspective," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 309-330, May.
    • Handle: RePEc:kap:jmgtgv:v:17:y:2013:i:2:p:309-330
    DOI: 10.1007/s10997-011-9178-1
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