The quality of earnings reported in the financial statement is very vital as it will be the key characteristic to improve capital market efficiency. Prior researchers indicate that the Earnings Quality were affected by several factors such as analysts forecast, leverage requirements, and management opportunities. One of the crucial factors in determining Earnings Quality is Related Party Transactions. It has been used as a medium in committing fraud across the corporate world for the last 20 years. The key problem affiliated to Related Party Transactions is that the transactions are influenced by the relationship between parties involved in the transactions. Among the transactions between related parties are purchase and sale of properties (assets), and sale of goods. Earnings reported in the financial statements is said to be high quality when the reported earnings are free from management prejudice and show the actual results of operations. This paper provides a holistic view of the concept of Related Party Transactions and Earnings Quality. The second purpose is to provide a better understanding of the relationship between Related Party Transactions and Earnings Quality. The discussion of this study will provide suggestions for improvements in corporate culture.
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In-Text Citation: (Suffian, Sanusi, Ghafar, & Wahab, 2018)
To Cite this Article: Suffian, M. T. M., Sanusi, Z. M., Ghafar, M. S. A., & Wahab, E. A. A. (2018). Managing Related Party Transactions on Earnings Quality. International Journal of Academic Research in Business and Social Sciences, 8(1), 477–489.
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