Does Concentrated Founder Ownership Affect Related Party Transactions? Evidence from an Emerging Economy

This study examines the impact of concentrated founder ownership on related party transactions (RPTs) for Indian firms. We find that concentrated founder ownership is positively related to RPTs and is more likely to encourage RPTs that are beneficial for the minority shareholders. We also observe that RPTs are associated with higher firm value. This relationship is more pronounced for business group firms and firms with more highly concentrated founder ownership. We show that the reputation incentive plays a very important role in founders’ decisions, and they use RPTs as an efficient transaction mechanism.