Related party transactions (RPTs) are transactions between a firm and individuals or organizations related to the firm, such as managers, boards of directors, major shareholders, and affiliates. Related party transactions include activities such as the selling and purchasing of assets, guaranteeing of loans, and exchanging of assets with different qualities. There are two competing views regarding RPTs. On the positive side, RPTs can be value enhancing as they can be utilized by business groups to share resources, reduce transaction costs, and as a result increase returns on assets. On the other hand, RPTs are often regarded as abusive; for example, RPTs can be used opportunistically by self-dealing controlling shareholders to extract private benefits at the expense of minority shareholders. In this case, controlling shareholders or parent firms may arrange transactions through related parties to extract private benefits or divert a firm’s resources from minority shareholders to themselves. They may also use their influential relationship over business groups to structure transactions within groups in a way that allows profit to be shifted from firms in a group either to the controlling shareholders’ pocket directly or to improve the financial position of troubled firms within the same group. These transactions may mislead the users of the financial statements of the affected firms. The collapse of various corporations around the world such as Enron and Hollinger (in the United States), BAT-Yava (in Russia), Greencool (in China), and Transmile Group Berhad (in Malaysia) has led to widespread interest in tunnelling and opportunistic behaviours driven by RPTs. The usage of RPTs is also to a large extent behind the huge debate about profit shifting and tax avoidance by several multinational corporations around the world. Large corporations such as Apple, Google, and Starbucks have been shown to move profits to low-tax countries in order to minimize their taxes and boost overall profits (Fairless 2015). Firms that use abusive RPTs may also engage in earnings management activities (e.g. Henry et al. 2007; Chen et al. 2011; Yang et al. 2014) or experience low earnings quality (e.g. Ge et al. 2010; Wang and Yuan 2012).