Earnings Management, Related Party Transactions and Corporate Performance: The Moderating Role of Internal Control

The primary purpose of this study is to investigate the impacts earnings management (EM) and related party transactions (RPTs) on corporate financial performance in an emerging market, Iran. This paper also aims examine moderating role internal control weakness (ICW) relationship between them. sample includes 108 Iranian manufacturing companies listed Tehran Stock Exchange (TSE) 2013 2018, panel data with random effects are used test hypotheses. When accounting-based measure called ROA defined as a proxy for performance, results show that there negative association real (REM) situation, while accrual-based (AEM) firm value correlated positively. However, when Tobin’s Q index we do not find any significant Consistent tunneling hypothesis or agency theory, our findings confirm RPTs damage (ROA Q) because managers probably consider it mechanism exploit enterprise resources owing existing conflictual interests. Moreover, purchase-related lead lower ROA, whereas sale-related negatively. weak has positive influence linkage AEM index. Finally, provide robust evidence sale growth institutional owners Q, although leverage mergers acquisitions (M&A) have destructive effect value.