Purpose – This paper examines the effect of related party transactions on crash firm-specific stock price crash risk. Ownership of a typical Korean conglomerate is concentrated in a single family. In those entities, management and board positions are often filled by family members. Therefore, a dominant shareholder can benefit from related party transactions. In Korea, firms have to report related party transactions in financial statement footnotes. However, those are not disclosed in detail. The more related party transactions are the greater information risk. Thus, companies with related party transactions are likely to experience stock price crashes.
Research design, data, and methodology – 2,598 firm-year observations are used for the main analysis. Those samples are from TS2000 database from 2009 to 2013, and the database covers KOSPI-listed firms in Korea. The proxy for related party transactions (RTP) is calculated by dividing total transactions to the related-party by total sales. A dummy variable is used as a dependent variable (CRASH) in the regression model. Logistic regression is used to explain the relationship between related party transactions and crash risk. Then, the sample was separated into two groups; tunneling firms and propping firms. The relation between related party transactions and crash risk variances with features of the transaction were investigated.
Results – Using a sample of KOSPI-listed firms in TS2000 database for the period of 2009–2013, I find that stock price crash risk increases as the trade volume of related-party transactions increases. Specifically, I find that the coefficient of RPT is significantly positive, supporting the prediction. In addition, this relationship is strong and robust in tunneling firms.
Conclusions – The results report that firms with related party transactions are more likely to experience stock price crashes. The results mean that related party transactions increase the possibility of future stock price crashes by enlarging information asymmetry between controlling shareholders and minority shareholders. In case of tunneling, it could be seen that related party transactions are positively associated with stock crash risk. The result implies that the characteristic of the transaction influences crash risk. This study is related to a literature that investigates the effect of related party transactions on the stock market.

Abstract
 1. 서론
 2. 선행연구 고찰 및 연구가설
 3. 연구방법론
  3.1. 변수설명
  3.2. 검증모형
  3.3. 표본
 4. 검증결과
  4.1. 기초통계량
  4.2. 상관관계분석
  4.3 회귀분석
  4.4. 추가분석
 5. 결론
  5.1. 연구결과 요약
  5.2. 논문의 시사점
  5.3. 연구의 한계점 및 향후 연구방향
 6. References

• Hae-Young Ryu(Assistant Professor, Department of International Business, Hansei University) | 유해영