Why Malaysian Companies Are Involved in Related Party Transactions (RPT) in the Context of Corporate Governance (CG)

Abstract

The regulations related to corporate governance mechanisms such as the sensitivity of pay and performance of chief executive officers, board characteristics, and watches outside of those that are well connected in related party transactions (RPTs)in Malaysia are struggling from the monitoring and enforcement of good corporate governance. The primary aims of this study are to investigate the gap that exists in Malaysian company failures due to appropriate related party transactions and to evaluate the impact of good corporate governance on shareholders' confidence in related party transaction (RPTs) disclosures from the Malaysian Accounting Standards Board (MASB) of regulations. In the year 2000, a study was done by Claessens that examined the data of 236 Malaysian public organizations. The study found the dominancy of a large block of shareholders in organizations in addition to weak institutional structures. This chapter focuses on the usage of related party transactions undertaken to benefit Malaysian companies which have led to financial reporting disclosure information.