RELATED PARTY TRANSACTIONS: EVIDENCE OF EARNINGS PERSISTENCE IN THE BRAZILIAN CAPITAL MARKET
EVIDÊNCIAS DE PERSISTÊNCIA DOS LUCROS NO MERCADO DE CAPITAIS BRASILEIRO
DOI:
https://doi.org/10.22561/cvr.v34i1.7435Keywords:
Earnings Persistence, Related Party Transactions, Earnings Quality, Earnings predictabilityAbstract
Related Party Transactions - RPTs are common day-to-day operations of large organizations and have both the potential to improve business efficiency, bringing greater synergy to company operations, and they can be used to expropriate minority investors, harming the entity value. Although the literature documents the use of RPTs to manipulate results, little is known about their impact on earnings persistence (Rahmat et al., 2020). This work aimed to investigate the influence of RPTs on earnings persistence, assuming the hypothesis that abnormal RPTs reduce persistence. The individual statements of 123 non-financial companies from B3 published from 2014 to 2018 were selected. The Dichev and Tang (2009) model was used to measure the persistence of earnings. To measure the abnormal RPTs, the residuals of the models of Jian and Wong (2010) and Al-Dhamari (2018) were used. To estimate the final models, quantile regressions were used in order to analyze the behavior of abnormal RPTs in specific quantiles of earnings persistence. As a result, it was found that abnormal sales and purchase transactions with related parties, considered individually or together, negatively influence earnings persistence, with greater emphasis on companies in the most persistent quantiles. The study corroborates what has been exposed internationally (Jian & Xiaohui, 2015) and contributes to the discussion of the potential of TPRs to influence on earnings quality from companies at emerging countries such as Brazil.
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