This study uses a comprehensive sample of 763 Chinese listed companies to explore the relationship between the extent of related party transactions and operational performance. The empirical results show that when the listed company is controlled by a related party, the higher the level of related party transactions, the worse the operational performance of the listed company; this is particularly true in the case of related party transactions that involve sales, loans, guarantees and mortgages, or leases. There is thus a clear need to improve the regulation of related party transactions and the related disclosure requirements.