The Impact of the corporate life cycle on the relationship between related party transactions and earnings quality: An Empirical study on listed corporations in the Egyptian stock exchange

Document Type : Original Article

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Accounting Department Faculty of Commerce Damnhour University Damnhour Egypt

Abstract

This research aims to test the relationship between related party transactions and the earnings quality, based on a set of characteristics of earnings quality, including: accrual quality, persistence, predictability, and finally volatility. The study also aimed to test the impact of the corporate life cycle stages on the previous relationship, using a sample of non-financial companies listed on the Egyptian stock exchange for the period of six years 2011-2016. The results of the study indicated a significant negative relationship between related party transactions and the earnings quality measured using the composite index. With respect to the individual measures of earnings quality, the results indicated a significant negative relationship between the related party transactions and the earnings quality, measured by the Persistence and the predi-ctability of earnings. On the other hand, the results of the study indi-cated that maturity stage reduced the negative impact of related party transactions on the earnings quality measured using the composite index. With respect to the individual measures of earnings quality, the results indicated an increase in the positive effect of related party transactions on the earnings volatility for companies that were in the growth stage.

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