Subsidiary Management with Reference to Related Party Transactions as a Tool for Enhancing Corporate Performance

Abstract

Globalization due to advanced technology, communication and transportation has newlineresulted in growth in multinational enterprises (MNE). Multinational enterprises are newlinegetting opportunities to conduct business across countries and make use of global newlinetrade. MNEs also have opportunity to use other countries comparative newlineadvantages; to increase profits by increasing market share or reducing costs in newlinethose countries. Key Managerial persons of corporations strive to maximize the newlineshareholder wealth through rational decision making at different management newlinelevels viz corporate, business and functional. To further the growth, economic newlineenterprises create subsidiaries for venturing into new business or product lines. newlineTherefore, entering into business transactions with subsidiaries, these transactions newlineneed a fair level of clarity and wisdom so that the principle of value creation for newlineshareholders of parents and subsidiaries could be followed. The managers are newlineauthorized to enter into contracts which include purchasing, divesting or leasing newlineassets, etc. The transactions entered by key managers who with any or all related newlineparties are referred to as related party transactions (RPT s). Thus the conclusions and recommendations of the present study were India has newlinemoved close to international standards by introduction and implementation of newlineCompanies Act 2013. Listed companies are adhering to the process and newlineprocedure of the approval and reporting of the Related Party Transactions. There newlinehas been considerable improvement in financial parameters post implementation newlineof Companies Act 2013 and finally Related Party Transactions income has a newlinesignificant impact on firm performance. newlineThe present study as in case of other studies has its own limitations and hence this newlinestudy also suggests some future research directions on this subject. newline newline