Sustainability Performance, Related Party Transactions, and Firm-Specific Risk

Abstract

Objective: The present study examines the impact of a company's sustainability performance on related party transactions and firm-specific risk. Methodology: The statistical population and sample of this qualitative study include 143 (1144 company-years) companies accepted and active in the Tehran Stock Exchange during the years 2015-2022. Findings: The research results indicate that with the increase in sustainability performance, the level of related party transactions rises. This is because a company's sustainability performance signifies its ability to continue and sustain its business, which can enhance the trust of shareholders, customers, suppliers, and other related institutions. This trust can lead to increased cooperation and positive interactions with related parties. Additionally, sustainability performance negatively affects firm-specific risk, which may be attributed to various reasons, including increased tolerance and resilience against market fluctuations, reduced financial and operational risks, and the development of effective managerial strategies that aid in adapting to changing market conditions. Conclusion: Thus, this study provides significant findings that can assist in improving companies' managerial and investment strategies.