Discriminatory related party transactions: A new measure

Purpose: The purpose of this study is to develop a new measure for discriminatory related party transactions (DRPTs). There are currently measures for such discriminatory transactions but the new measure has a strong theoretical basis and is less susceptible to measurement error. Design/methodology/approach: This paper develops and tests a new measure for these discriminatory transactions. Type I and Type II error rates and the power of the new measure are compared with an existing measure using computer-simulated and real data. Findings: The capital market sensitivity of the new measure is also tested and compared with the existing measure. The new measure is found to be superior. Practical implications: The new measure of DRPTs has the potential to contribute to both further research on the impact of related party transactions and policy-making in relation to DRPTs. Originality/value: This paper has developed and tested a new measure for DRPTs.