Related party transaction means a business deal or arrangement between two parties who are joined by a special relationship prior to the deal. Related party transactions are usually created in Asian countries where management and ownership aren't separated. Because one party has power to influence another, it is possible unfair related party transactions could be processed. If there weren't a special relationship, these transactions might not happen or be processed on different conditions. Therefore regulators request firms to disclose related party transactions as financial statement footnotes, establish audit regulations regarding related party transactions. Prior studies have generally reported private firm owners pursue private profits and reduce tax expenses through related party transactions. The disclosure of related party transactions is suit investors' purpose in analyzing financial statement. However because only the amount for related party transactions is disclosed, outside investors can't figure out the content of transactions clearly and information asymmetry gets bigger. In this study, we examine the effect of related party transactions on information asymmetry. Because analysts are referred to as efficient users using firm-level data to develop a more accurate estimate of firm value, we use analyst forecast errors as a proxy for information asymmetry. In addition, we measure information asymmetry in the firms with a large proportion of foreign ownership. In the previous studies, foreign shareholders are considered as efficient observers. As foreign ownership increases, information asymmetry caused by related party transactions Related party transaction means a business deal or arrangement between two parties who are joined by a special relationship prior to the deal. Related party transactions are usually created in Asian countries where management and ownership aren't separated. Because one party has power to influence another, it is possible unfair related party transactions could be processed. If there weren't a special relationship, these transactions might not happen or be processed on different conditions. Therefore regulators request firms to disclose related party transactions as financial statement footnotes, establish audit regulations regarding related party transactions. Prior studies have generally reported private firm owners pursue private profits and reduce tax expenses through related party transactions. The disclosure of related party transactions is suit investors' purpose in analyzing financial statement. However because only the amount for related party transactions is disclosed, outside investors can't figure out the content of transactions clearly and information asymmetry gets bigger. In this study, we examine the effect of related party transactions on information asymmetry. Because analysts are referred to as efficient users using firm-level data to develop a more accurate estimate of firm value, we use analyst forecast errors as a proxy for information asymmetry. In addition, we measure information asymmetry in the firms with a large proportion of foreign ownership. In the previous studies, foreign shareholders are considered as efficient observers. As foreign ownership increases, information asymmetry caused by related party transactions will be reduced. However, because investors have difficulty in understanding related party transactions abroad, information asymmetry will be increased in export-oriented firms. Using related party transaction data during 2002 through 2009, we find that related party transactions tend to increase information asymmetry between investors. Meanwhile the effect of related party transactions on analyst forecast errors decreases when firms have higher foreign ownership than others. This result suggest that foreign investors play a role in monitoring related party transactions and this reduces information asymmetry. Furthermore, in the firms with a large share of overseas sales, which is measured by the relative ratio of overseas sales to total sales, analyst forecast errors are increased by related party transactions. This suggests that related party transactions have different effects on the analyst forecast errors according to the characteristics of transactions and it is necessary to adjust the disclosure regulation of related party transactions.