An Analytical Study of the Legal Treatment of Related Party Transactions in Nigerian Listed Companies

Related party transactions between listed companies and their controlling shareholders, directors, and affiliated entities create agency problems that may result in expropriation of minority shareholder wealth, yet the legal treatment of these transactions under the Companies and Allied Matters Act 2020, the Nigerian Code of Corporate Governance, and the Nigerian Exchange Group listing rules reveals significant enforcement gaps. This study analyses the legal framework governing related party transactions in listed companies, examines disclosure quality in annual reports, and empirically assesses whether deficient governance of related party transactions is associated with abnormal stock price behaviour and earnings quality. A sample of 40 NGX-listed companies from 2019 to 2022 was examined, with disclosure quality scored against CAMA 2020 and Nigerian Code of Corporate Governance requirements. Regression analysis was used to estimate the relationship between related party transaction governance quality and stock return volatility and discretionary accruals. Results indicate that 55 percent of sampled companies failed to provide complete independent director approval documentation for material related party transactions. Companies with poorer related party transaction governance showed significantly higher earnings management indicators. Stock return volatility was not significantly associated with RPT governance quality in the studied period. The study fills an empirical gap in Nigerian corporate governance research and recommends enhanced RPT disclosure mandates, strengthened independent director approval requirements, and SEC enforcement action for material RPT disclosure failures.

Keywords: related party transactions, corporate governance, minority shareholders, CAMA 2020, Nigerian Exchange Group