Do related party transactions afect the relationship between political connections and frm value? Evidence from Egypt

Abstract

This paper aims to ( i ) investigate the impact of political connections ( PC ) and related party transactions ( RPTS ) on the firm value ( FV ) , and ( ii ) test the moderating effect of RPTS on such relationship , while controlling for the firms ' corpo rate governance mechanisms . Based on 315 observations from publicly listed firms in Egypt , our results reveal that ( 1 ) there is a positive relationship between PC and the FV , ( ii ) there is a negative relationship between RPTS and the FV , and ( iii ) the existing of RPTS as a moderating variable enhances the impact of the politically connected companies on the FV . The findings suggest that the Egyptian firms are much affected by the politically connected board of directors or owners , and this significantly exists when associated with related party transactions , despite that , the corporate governance practices could mitigate such effects