An Empirical Research on How Ratchet Effect Works in Related Parties Transaction Based under Fixed Effect Model

• In Event: Reception with ELS posters
  In Poster Session: Poster 6

Abstract

Abstract: This paper presents several case studies of listed companies on the Hong Kong Stock
Exchange, and found 72.3% of completion is the benchmarks for the execution of related party
transactions. Whilst related party transactions budget execution under 72.3% over years are failing. .
Firstly, the status quo and existing problems of the current related party transactions in the budget
management are analyzed, and three different hypotheses of the related party transaction budgets
before, after, and after the transfer of listed companies of the Hong Kong Stock Exchange are put
forward. Based on the regression analysis model of the effect, and based on this data, the three
assumptions were verified using the 1999-2016 data of 120 Hong Kong-listed start-up companies.
The empirical results show that there are ratcheting effects on the related party transaction budgets
of the Hong Kong Stock Exchange listed companies before and after the transfer. It shows that the
management of the sample companies are all aggressive and constantly providing benchmarks.
Keywords: related party transactions, budget variances, ratcheting effect

Author

• Davhen Wong, Mr.