Ching-Lung Chen, Pei-Yu Weng, Badingatus Solikhah, Pei-Yun Shiu
Purpose – This study aims to examine the relationship between related party sales (RPT) and earnings information quality (IFQ), with particular reference to the possible efficient contracting of the eliminated RPT (ERPT) in preparing consolidated financial statements. The authors also examine the role of insider share pledging in influencing this relationship. Design/methodology/approach – Using a sample of 21, 778 firm-year observations of Taiwanese listed firms from 2005 to 2021, this study hypothesizes that ERPT are positively associated with IFQ and insider share pledging will weaken this relationship. ERPT are measured as the difference between RPT reported in the parent company–only and consolidated financial statements. IFQ is proxied by earnings precision and accruals quality, and the effect of insider share pledging is tested through the interactive variable. Findings – Empirical results indicate that ERPT has a significant positive influence on IFQ, suggesting the importance of ERPT as a determinant of earnings information quality. Further evidence demonstrates that insider share pledging weakens the link between ERPT and IFQ, underscoring potential conflicts of interest and agency problems associated with this pledging behavior. Originality/value – Based on Taiwan’s dual-reporting system, this study can use ERPT as a measure to proxy the efficient contracting of RPT, which in turn, examines the engagement of ERPT activities on IFQ. This provides new insights into how contracting RPT reduces information asymmetry and enhances the precision of earnings signals. The findings enrich the understanding of how RPT and disclosure regulations affect the quality of earnings information, while also providing valuable policy implications for regulators. © 2026 Emerald Publishing Limited
Department of Accounting, National Yunlin University of Science and Technology, Yunlin, Taiwan; Department of Accounting, Universitas Negeri Semarang, Semarang, Indonesia; Yunlin County Branch, National Tax Administration of Central Taiwan Province, Ministry of Finance, Yunlin, Taiwan
