Understanding Related Party Transactions in Indian Companies
This book introduces the core concepts of Related Party Transactions (RPTs), examines the dominant features of the Indian business environment that make RPTs common, and traces the evolving legal framework for regulating RPTs in the country. It also contextualizes the discussion by drawing on notable RPT scandals and diverse regulatory approaches across the globe, and highlights tensions in the theoretical literature.
Related party transactions stand among the most crucial corporate governance challenges in India, where business groups, family firms, and concentrated ownership dominate. Building on an overview as well as a detailed descriptive analysis of RPTs undertaken by the top 500 listed companies in India (excluding financial, real estate, and utility companies) over 17 years, this book examines the prevalence of RPTs in the country, how this has changed over time, and how the incidence and intensity of RPTs vary across industries, related party types, and transaction types.
Beyond the basics and overview, this book contributes to contemporary RPT literature through original empirical findings on three crucial research questions: (A) What are the drivers of RPTs? Do these drivers suggest efficiency or abuse? Do companies belonging to business groups and families exhibit higher levels of RPTs? Do corporate governance factors and auditors constrain RPTs; (B) How do the RPTs affect the financial performance of firms, and how does the market react to them; (C) Do companies with high levels of RPTs also show higher levels of earnings management (accrual-based and real)?
Finally, this book synthesizes these findings and discusses the implications and future directions for research, practice, and regulation. The book is an essential resource for academicians and research scholars studying corporate governance, business groups, family firms, and earnings management. It is a valuable reference for directors, investors, financial professionals, auditors, regulators, and the public seeking to understand the realities of RPT in India.
Arpita Ghosh is Professor in the Finance and Control Group of the Indian Institute of Management (IIM) Calcutta, Kolkata, India. Before joining IIM Calcutta, she was a faculty member at IIM Ahmedabad. Her qualifications include a PhD (Fellowship, Finance and Control, IIM Calcutta) and a post-graduate degree in Commerce from the University of Calcutta (M. Com). She is also a Chartered Global Management Accountant (CGMA, CIMA) and an ACMA (Associate Chartered Management Accountant, Academic). She has authored books and cases, presented papers at leading conferences, and published articles in national and international journals. Her research interests include corporate governance, earnings management, financial reporting in banks, environmental, social, and governance (ESG) issues, corporate social responsibility, enterprise risk management, accounting ethics and sustainability reporting. She has over 18 years of teaching experience across various programs and workshops at IIMs, covering corporate financial reporting and analysis, cost management, financial statement analysis, strategic cost management, management games, corporate governance, empirical accounting research, theoretical aspects of financial accounting, empirical research in banking, sustainability reporting in India, and case analysis/ writing skills. At IIM Calcutta, she has also served as Group Coordinator of the Finance and Control Group; as Faculty Coordinator of the institute’s Case Research Centre (IIMCCRC); and is currently the Coordinator of the Centre for Development & Environment Policy (CDEP).