Related party transactions

3 important questions on Related party transactions

What is a self-dealing transaction? TQ


p 145

Self-dealing transaction: takes place when an influential manager or controlling shareholder transacts with the company in favour of itself, not the company

vb: loan by shareholder from company's assets

What is insider trading? TQ

P. 146


Insider trading: when trading in the company's shares on the basis of yet undisclosed price-sensitive corporate information, third parties appropriate part of the company's information by selling or buying before it reflects in the stock prices.

What are some of the reasons that related-party transactions are indeed permitted? TQ


p 146To make business possible in certain situations:
- Prohibiting managerial compensation and trading in the company's shares would be absurd
- Prohibitions won't always solve anything
- Small related-party transactions are not harmful

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