Board diversity and related party transactions

Third Author's Department

Accounting Department

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https://doi.org/10.1016/j.frl.2025.107046

All Authors

Bilal Al-Dah Mustafa A. Dah Moataz El-Helaly

Document Type

Research Article

Publication Title

Finance Research Letters

Publication Date

5-1-2025

doi

10.1016/j.frl.2025.107046

Abstract

We examine the relation between board diversity and Related Party Transactions (RPTs), as well as the consequent impact on firm performance. We posit that board diversity has a favorable influence on RPTs and their value implications. Our results suggest that board diversity is positively (negatively) related to the likelihood of Business (Non-Business) RPT engagements. Moreover, board diversity enhances the positive impact of Business RPTs on firm performance while mitigating the negative effects of Non-Business RPTs. Overall, our findings support theories on the motivations behind different types of RPTs and highlight the essential role of board diversity in elevating internal monitoring.

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