Related-party transactions, dominant owners and firm value

We examine RPTs in one Continental European country, Spain, where ownership concentration is prevalent and state ownership is practically non-existent. Our results show that more than half of listed Spanish firms commit to RPTs over the analyzed period. Furthermore, from the perspective of the related party to the transaction, connected transactions between listed Spanish firms and their blockholders account for 99.84% of the total RPTs carried out by listed Spanish firms. Finally, our findings reveal that financial, operating and investment dimensions of RPTs negatively affect firm value due to the presence of an expropriation effect whereby RPTs are driven by insiders’ opportunism, regardless of the dimension (financial, operating and investment) affected by the existence of RPTs. Thus, in a context where the main concern of corporate governance is the potential expropriation of minority shareholders by controlling owners, RPTs require special regulator's attention in order to improve investor protection and market confidence to promote a more efficient allocation of resources."