Opportunistic Related Party Transactions and Sensitivity of Investments and External Financing to Market Value and Internally Generated Cash Flows

Articles in Press

Document Type : Research Paper

Authors

Department of Accounting, Faculty of Management & Economics, University of Guilan, Rasht, Iran.

10.22103/jak.2025.25453.4191

Abstract

Objective: Investors and creditors pay special attention to the market value and internally generated cash flow by companies; however, according to agency theory, the existence of opportunistic related party transactions (RPT) may have a different impact on their decision. This study examines how different types of RPTs influence the sensitivity of a firm's investment and external financing decisions.
 
Method: Employing a descriptive-correlational methodology, this applied research analyzed a final sample of 134 companies (804 observations) from the population of all firms listed on the Tehran Stock Exchange between 2018 and 2023.
 
Results: The results show that opportunistic RPTs are associated with a significant decrease in the sensitivity of external financing to the Tobin’s Q. According to the research results, opportunistic RPTs are associated with an increase in the sensitivity of investment to the Tobin’s Q. Also, the relationship between investment sensitivity to internally generated cash flow and the relationship between external financing sensitivity to internally generated cash flow in the presence of opportunistic RPTs is not significant.
 
Conclusion: According to the results, opportunistic RPTs affect the decision of creditors, but this has not been observed in the case of investors. Also, investors and creditors pay more attention to the market value than to the internally generated cash flow in the company in making decisions. This study has a contribution by separating RPTs into two types normal and opportunistic and examining them more closely from the perspective of conflict of interest.

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References

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Journal of Accounting Knowledge

Articles in Press, Accepted Manuscript
Available Online from 03 November 2025

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History

  • Receive Date: 22 June 2025
  • Revise Date: 26 September 2025
  • Accept Date: 15 October 2025

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