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.