Related Party Transactions and Investment-Cash Sensitivity: Evidence from GCC

The objective of our proposed study is to investigate the relationship between Related Party Transactions (RPTs) and investment-cash flow sensitivity in the GCC firms. The economies of the GCC countries are developing at an unprecedented pace. At the same time, the capital markets of the region are experiencing steady development, with an increasing number of government and family-owned businesses looking to become publicly-traded. However, concentrated ownership and the presence of business groups in the GCC countries pose a great challenge of dealing with the negative consequences of RPTs. Therefore, GCC countries provide a unique opportunity to examine the effect of RPTs on the investment-cash sensitivity. This study will provide clear implications in the local context as we examine whether RPTs create value for the firms through Propping or expropriate the shareholders wealth through the Tunneling channel.

The objective of our proposed study is to investigate the relationship between Related Party Transactions (RPTs) and investment-cash flow sensitivity in the GCC firms. The economies of the GCC countries are developing at an unprecedented pace. At the same time, the capital markets of the region are experiencing steady development, with an increasing number of government and family-owned businesses looking to become publicly-traded. However, concentrated ownership and the presence of business groups in the GCC countries pose a great challenge of dealing with the negative consequences of RPTs. Therefore, GCC countries provide a unique opportunity to examine the effect of RPTs on the investment-cash sensitivity. This study will provide clear implications in the local context as we examine whether RPTs create value for the firms through Propping or expropriate the shareholders wealth through the Tunneling channel.