Related party transactions and accounting quality in Greece

Purpose - The purpose of this paper is to investigate the relationship between related party transactions (RPTs) and accounting quality for the firms listed on the Athens Stock Exchange. Design/methodology/approach - This paper compares accounting quality across two groups of firms. The first group contains firms that conduct material RPTs and the second group contains firms that do not conduct material RPTs. Accounting quality is measured using different proxies of earnings management. Four earnings management proxies are used, three metrics for earnings smoothing and one for managing earnings towards a target. Findings - The results of the current study do not suggest that firms with significant RPTs exhibit less accounting quality compared to non-RPTs firms. Research limitations/implications - The results support the argument that RPTs are conventional transactions that are mainly conducted for business purposes. Originality/value - This paper contributes to the literature by examining the effect of RPTs on accounting quality in Greece and whether firms that conduct RPTs exhibit less accounting quality or not.