Accounting In Malaysia In The Post-New Economic Policy (NEP) Era

Following the economic recession in 1985-86 but prior to the Asian Financial Crisis in the thirdquarter 1997, accounting in Malaysia appeared to have been energised with major amendmentsof the Companies Act 1965, activation of the statutory accounting body Malaysian Institute ofAccountants (MIA) and talks over the setting up the Malaysian Accounting Standards Board(MASB). This study attempts to find out the reality of these changes and the reasons behindthis reality. By applying the political economic approach to accounting (Cooper & Sherer,1984) and with data obtained from primary and secondary source documentation and in-depthinterviews, it is found that superficial accounting changes had taken place: Companies Actamendment on additional auditor reporting duty was lacking in enforcement, the revived MIAacted inadequately as accounting regulator; and, the MASB was established with no enforcementcapability. These changes were consistent with and stemmed from Malaysia's social, economicand political attributes which were supported by the elite class.  Copyright © www.iiste.or

The behaviour of individual investors in Malaysia: a governance perspective

Despite the many benefits that good governance brings to investors, academics contend that individual investors have no significant role to play in governance as it is economically unviable and too time consuming for them. On the other hand, regulators encourage and seem to expect individual investors to be governance interested, especially in exercising their ownership rights and making use of governance redress mechanisms whenever the need arises. Are such expectations of how these investors should behave at all reasonable? More importantly, there is anecdotal real-life evidence that at least some individual shareholders in Malaysia do play a role in governance such as attending AGMs. If, as assumed by academics that it is not viable for them to do so, what is the logic and/or motivations behind such observed behavioural tendencies? This study explores the many possible ways by which investors take governance into account (including harder-to-observe treatments – e.g. governance featuring in the form of share investment evaluation criteria). Yet unidentified, important actual motivations and justifications for all reported governance-related tendencies are studied as well. The actual relevance and also prevalence of such treatments and reasonings are largely unexplored in the empirical literature. Essentially, the study considers all governance-related attributes (both firm-level and country-level) that are potentially important to individual investors as well as all governance-related actions/tendencies exhibited by them throughout the typical share investment cycle. Each action/tendency is viewed and made sense of (i) as an integrated part of the sets of behaviours identified, (ii) within the governance environment and investment context where it takes place and (iii) from the standpoint of individual investors. Individual investors‘ relative propensities toward considering governance and/or undertaking governance-related actions are found to be (i) affected by, and are thus rational responses to, the governance-related institutional, environmental, cultural constraints they face and (ii) influenced by their personal investment inclinations, stylistics and preferences such as their primary investment strategies. These entail a number of implications that inform both policy and practice

Moneylenders law in Malaysia : a comparative study with the United Kingdom

This thesis alms to examine the extent to which the Malaysian Moneylenders (Amendment) Act 2003 has rectified the defects of its parent Act, the Malaysian Moneylenders Act 1951 in regulating and controlling the business of moneylending, protecting the borrowers in the course of moneylending transactions and eliminating illegal moneylending. In order to achieve these objectives, an in-depth analysis of the 2003 Act was therefore undertaken. This includes analysing the licensing regime, the advertising system, the enforcement mechanisms, the prescribed moneylending agreement, the conduct of moneylending business, as well as civil and criminal sanctions. From the methodological point of view, this thesis seeks to demonstrate the importance of a comparative approach as a key to understanding the present law of a country and to determine whether further reforms are needed. Thus, the English Consumer Credit Acts 1974 and 2006 were chosen as a basis of comparison, for justifiable reasons. The points of comparison are analysed in terms of their strengths and limitations, with a view of suggesting ways to optimise the strengths and minimise the limitations. The findings of the research indicate that the 2003 Act has brought significant reform to the moneylending industry in line with modern credit practice. However, despite the remarkable improvement, the 2003 Act also suffers from serious flaws in several important aspects. Immediate attention and further reform are essential in the areas of licensing, advertisement permits, search and arrest as well as the prescribed moneylending agreement. Failure to address these critical issues will undermine the very aims of the reform and may jeopardise the interest of borrowers in the moneylending transactions

Effective cartel enforcement: getting Malaysia ready for what lies ahead

Cartel enforcement is challenging, particularly for developing countries with young competition enforcement regimes as cartels are illicit in nature and competition authorities are faced with connected firms that sometimes enjoy close links with policy makers. So, why should developing countries be concerned with effective cartel enforcement? This thesis answers the question by explaining it from international perspective – international cartel enforcement via regional trade agreements between developed and developing countries. This work argues that in order to encourage the utilisation of competition related provisions in regional TAs there are prerequisites to be satisfied. One of the prerequisites is there has to be incentives for the regional TA signatories to cooperate in international cartel enforcement by invoking the competition related provisions under regional trade agreements. Incentives arise out of the existence of credible competition enforcement regimes and the strength of trade relationship between the regional trade agreement partners. Without domestic competition law in place, there is no legal basis for cooperation. Even if there is a competition law in place, the absence of a credible competition enforcement regime would not incentivise a developed country with an advanced competition jurisdiction to invoke competition related provisions in a regional trade agreement to address cross border competition infringements. Therefore, it is important for trade reliant developing countries to have a credible competition enforcement regime in place, lest international cartels continue to thrive and adversely impact the domestic market of developing countries and international trade. This includes ensuring that effective cartel enforcement exists in their jurisdiction. In this regard, this work focuses on Malaysia to illustrate how it can be done. Malaysia, a middle income developing country which had fairly recently adopted a competition law with the enactment of the Competition Act 2010. Although the law is already in place, Malaysia is yet to formulate a coherent and formal cartel enforcement policy for the country. The policy is important for effective cartel enforcement because it complements the law and provides clarity and transparency in regard to legislative implementation. In determining an appropriate cartel enforcement policy for Malaysia, the discussion encompasses the following aspects: an appropriate cartel enforcement policy for Malaysia; exemptions of horizontal agreements; limitations of the Competition Act 2010 in light of tougher cartel enforcement. These are the pivotal aspects in cartel enforcement which ought to be focused on to facilitate Malaysia in formulating its cartel enforcement policy. At the end of the discussion, this work suggests the form and contents of Malaysia’s cartel enforcement policy which account for Malaysia’s limitations as a middle income developing country with a young competition jurisdiction. The work also finds that there is insufficient empirical evidence available on market concentration in Malaysia and therefore recommends the necessary studies which ought to be undertaken in order to facilitate the competition authorities to formulate an accurate competition enforcement policy

Individual retirement savings behaviour : evidence from Malaysia

This thesis investigates factors that influence individuals‟ investment choice decisions within the context of retirement savings in Malaysia. The focus is on individuals‟ likelihood of investing part of their retirement savings in approved unit trusts (also known as mutual funds). In addition, individuals‟ choice of fund and mutual fund selection criteria are also explored. This thesis utilised questionnaire-based surveys to solicit responses from members of the Employees Provident Fund (EPF), as well as from unit trust consultants. Data collected from 440 EPF members and 561 unit trust consultants were analysed using statistical procedures of SPSS version 18.0 (also known as PASW 18). The results of logistic regression models revealed three significant predictors of individuals‟ likelihood to invest part of their retirement savings in the unit trusts: perceived importance of financial advisor, financial risk tolerance, and perceived plan design. Financial knowledge appeared to be insignificant in influencing individuals‟ investment choice decision. Furthermore, the thesis found that religious affiliation, religious commitment and Muslim religiosity had no significant effect in individuals‟ investment choice decision. In terms of demographic variables, gender, age, and marital status were all found to be significant predictors of individuals‟ likelihood to invest part of their retirement savings in the unit trusts. With respect to mutual fund selection criteria, the thesis found that the fund‟s commitment to Islamic principles, past performance of fund and overall reputation of fund were the top three criteria considered important by the EPF members. In contrast, from the consultants‟ point of view, the top three criteria considered important were the past performance of fund, overall reputation of fund, and fund ratings. Although the earlier results indicated no significant effect of religion on the individuals‟ likelihood to invest part of their retirement savings in the unit trusts, additional analyses revealed that religious affiliation, religious commitment, and Muslim religiosity had significant influence on the individuals‟ choice of unit trust fund. Several implications emerge from these empirical findings. First, the thesis highlighted the role of the unit trust consultants in individuals‟ investment decision making. Therefore, fund management companies and the governing body of the unit trust consultants should ensure that ongoing training is provided so that proper advice and recommendations can be delivered to the consultants‟ clients. Next, the thesis provided insightful information to the EPF as the policy maker, on the retirement savings behaviour of its members. In particular, the study presented the first evidence with regard to the EPF Members Investment Scheme (MIS), a unique feature that differentiated this retirement plan from its counterparts in emerging countries, as well as developed countries. Last, but not least, given that Malaysia is a multi-cultural nation, the findings of the thesis suggest that religion had some effect on individuals‟ choice of fund. Therefore, fund management companies might make use of the information provided by the thesis in better promoting their funds

Fraudulent financial reporting : an application of fraud models to Malaysian public listed companies

There have been great concerns among stakeholders on how fraudulent financial reporting (FFR) can affect the reputation of public-listed companies (PLCs). The post Enron era has witnessed many FFR cases around the globe. FFR has impacted many countries around the world including Malaysia, the focus of this thesis. FFR not only causes significant ethical concerns to both individuals and companies but also involves a great amount of financial losses. A survey conducted by KPMG (2014) involving Chief Executives in Malaysian PLCs between January 2010 and December 2013 has found that 26% of respondents who experienced fraud were able to state the estimate of fraud losses experienced, which amounted to RM 2.41 million (≈ USD 0.72 million) on average. Thus, FFR is a major concern for the two primary regulators of the capital markets in Malaysia; Bursa Malaysia and Securities Commission Malaysia (SC). Both authorities continue to refine the parameters that help to ensure rigorous surveillance over Malaysian PLCs (Danial et al, 2014). Effective anti-fraud programmes which include the ability to predict the likelihood of FFR among Malaysian PLCs continue to be important not only for regulators, but also to the nation. Therefore, this research examines suitable determinants of the likelihood of FFR among Malaysian PLCs based on the fraud-risk factors identified in the Fraud Models [i.e. Fraud Triangle Model (Cressey, 1953), the Fraud Diamond Model (Wolfe & Hermanson, 2004) and Crowe’s Fraud Pentagon Model (Crowe, 2011)]. Based on previous literature on FFR and the Fraud Models, this research has identified five predeveloped hypotheses and ten pre-developed sub-hypotheses. Semi-structured interviews were undertaken to explore relevant fraud-risk factors from these predeveloped hypotheses and sub-hypotheses in the Malaysian context. Additionally, interview results have also suggested measurable fraud-risk factors as Malaysian specific results, which have not been tested before. These factors are ignorance and greed. Then, these factors were statistically tested in quantitative analyses (i.e. descriptive statistics and binomial logistic regression analysis). Utilising crosssectional data series, which involve 160 Malaysian PLCs (45 fraudulent PLCs and 115 non-fraudulent PLCs) for a 10-year period (from 2004 to 2013), this research examines sixteen proxy variables on seven hypotheses and fourteen sub-hypotheses. Ultimately, based on panel data models of binomial logistic regression analysis, this research has found a new fraud model with suitable fraud-risk factors that could fit current business environment and corporate governance culture in Malaysia. In short, utilising a mixed-method design, this research has explored a new perspective in suggesting suitable fraud-risk factors to predict the likelihood of FFR among Malaysian PLCs

Earnings Quality, Family Influence and Corporate Governance: Empirical Evidence from Malaysia

This study investigates whether family ownership and control, and corporate governance are associated with earnings quality, and whether family influence in firms weakens the association between corporate governance and earnings quality. This study uses a panel sample of 527 publicly traded firms over the period 2003-2008 from the Malaysia Stock Exchange (Bursa Malaysia). Identifying family firms as firms in which family members hold a significant portion of shares and possess control over the board of directors, this study finds that family firms have significantly higher earnings quality. The results remain unchanged, even after using alternative measures of earnings quality and family influence. This study also finds that the earnings quality of firms in Malaysia is positively associated with the size and independence of the audit committee and negatively associated with the size of the board of directors. However, these relationships exist only for nonfamily firms. These results on the corporate governance variables suggest that the effectiveness of corporate governance could be mediated by family influence. Using multivariate regressions that include interaction variables for corporate governance and family firms, the study finds that the relationship between corporate governance and earnings quality is mediated by family ownership and control. The result is consistent with the argument that the monitoring role of corporate governance reduces when there is substantial control by family owners in a firm. Overall, this study concludes that family ownership and control drives higher quality earnings for firms regardless of their corporate governance structure

Modelling cross-market linkages between global markets and China’s A-, B- and H-shares

One of the biggest challenges in quantifying joint risk and forming effective policies in financial management and investment strategies is to fully understand the characteristics of market associations in low and high volatility periods. Market interdependence, therefore, is a hot topic that has received interest from academics and industry experts, especially since the Asian Financial Crisis in 1997. China, being the world’s second-largest economy, has been the centre of many studies investigating stock market dependencies. While China has three major share types, namely A-, B- and H-shares, with different market players, market characteristics and operating efficiency, the number of studies on each of these share types remains conservative in comparison to the vast literature on the financial modelling of market interdependencies. Given the need for a more comprehensive understanding of the influence between these share types and other global markets, especially during market turbulences, this thesis examines the cross-market linkages between A-, B- and H-shares in China and several major emerging and advanced markets from 2002 to 2017, which is divided into two non-crisis periods and two crisis periods. This thesis assesses market integration among 17 markets, including asymmetries and leverage effect in the marginal distributions, volatility spillover and tail dependence. The thesis aims to: 1) investigate the univariate asymmetries and leverage effect in the distributional volatility of each time series and to detect volatility spillover between China and other studied markets; 2) assess the dynamic multivariate dependence between China and other studied markets; 3) evaluate the bivariate dependence structure for each of China’s markets and other studied markets using seven different copula functions; and 4) study the multivariate joint tail dependence structure of all studied markets using vine copulas. There are various findings from the thesis. Many advanced and emerging markets experienced leverage effect and asymmetries in volatility. China’s markets were much more prone to local shocks than external shocks and in many cases, there is evidence that China’s markets diverged from the global trends especially during the crisis periods. Besides, segmentation between China’s markets and the United States is clearly evident. In addition, regional dependence is stronger than intra-regional dependence. The thesis also found the existence of contagion effect between each of China’s markets and various markets in the sample in the Global Financial Crisis. Finally, heterogeneity was found for A-, B- and H-shares in various aspects, from distributional asymmetries to joint behaviour in both crisis and non-crisis periods. A novel aspect of this thesis is that it closes the gap in the literature of market linkages for A-, B- and H-shares with other global markets by assessing volatility spillover, time-varying co-movement, and tail dependence among the studied markets. This thesis provides various implications in both theoretical and empirical contexts in many areas including measuring joint risk at the tails, constructing an optimal portfolio, hedging, and managing financial exposures and contagious volatility from other markets. The thesis provides some recommendations and suggestions regarding the policies implemented in China

Predicting Forced Financial Restatement: Evidence from the Malaysian Capital Market

Historical precedent shows that forced financial restatements can have serious implications for the firm affected, investor confidence in financial markets and a country’s economic development more generally. The purpose of this study is to explore factors which affect the likelihood of forced financial restatements. This issue is particularly pertinent in the Malaysian context, as, despite repeated efforts by the government to improve the corporate governance of listed companies, weak regulatory enforcement and the influence of family groups and politicians give rise to continued concerns about financial reporting quality. This study uses the multivariate logit model to analyse firm characteristics which relate to forced financial restatement. The analysis was performed on the Malaysian listed companies from 2002 to 2012. Findings indicate that the likelihood of forced restatements was related to aggressive accounting practices. In addition, the presence of politically-connected shareholders or top executives, the proportion of independent directors on the board, firms’ decreasing level of internal fund and share price volatility were also related to an increased likelihood of forced restatement. More detail tests on the attributes of the different types of restatement show that the likelihood of income-increasing and zero-effect forced restatement event were affected by opportunistic earnings management practices. This contradicts with the results shown for forced income decreasing restatement as they do not imply aggressive accounting, but are more likely to result from mistakes or technical accounting matters, such as change in accounting policy. This study contributes to our understanding by examining a much wider range of financial and non-financial factors as possible determinants of forced restatements. Moreover, compared to prior research, this study explores forced income-decreasing, income-increasing, as well as zero-effect restatements to distinguish between earnings restatements that arise from related to opportunistic behaviour and those linked to accounting errors. Methodologically, this study further contributes by applying the penalised likelihood logit and structural equation modelling approach which are scarcely examined in accounting research, to determine factors affecting the likelihood of forced restatements. It was not possible to develop a valid predictive model for forced financial restatements which is recognised as a limitation to the study. However, the findings in this study do provide some insights into factors which relate to the likelihood of forced restatements, which should be useful for investors, analysts, auditors, and regulators

Musharakah and its compatibility with the Malaysian legal and regulatory framework :an examination on the implementation of risk sharing

PhD ThesisUndoubtedly, justice forms an integral part of Shariah (Islamic law) and shall be observed in each of its domain including the commercial segment. This position, therefore, sets the idea of risk sharing at the heart of any business dealing with the profit motive since it manifests the notion of justice; the idea that is propagated by Shariah through the discourse of Maqasid AlShariah (the higher objectives of Shariah). In addition, the existence of the element of risk sharing is also essential in determining the validity of such a dealing and to justify the enrichment derived from it. In the Malaysian context, the initiative for strengthening the implementation of the idea of risk sharing has been demonstrated in various ways. One of these initiatives is the introduction of the Musharakah Mutanaqisah home financing as an alternative to the Bai Bi Thaman ‘Ajil (BBA) home financing. As an equity financing, it is expected that the product would be able to demonstrate such idea as opposed to what is entailed by the BBA home financing which rides on the concept of debt-based financing. This study examines the extent to which the existing legal and regulatory framework in Malaysia supports the implementation of risk sharing thus upholding the notion of justice by referring mainly to the Musharakah Mutanaqisah home financing. It argues that the said framework is not consistent with the purpose of the introduction of the Musharakah Mutanaqisah home financing as mentioned above ie to implement risk sharing as it identifies three main issues. The first issue is the characterisation given by the Musharakah Regulatory Policy of the Central Bank of Malaysia (BNM) to the product as Shirkah Al-Milk which inflicts two major problems ie inaccurate definition which leads to different consequences pertaining to the risk sharing requirement and negating the implementation of risk sharing. The second issue is the discrepancies between equity and debt financings as demonstrated by the Islamic Financial Services Act 2013 (IFSA 2013) and the Musharakah Regulatory Policy; debt financing defeats the idea of risk sharing and serves as a major setback to its advocacy. The third issue is the inability of the product to be recognised as a partnership from the legal standpoint (by virtue of the Partnership Act 1960, PA 1960) which infers the product is not an equity financing but a debt financing instead. The study proposes several further steps to be undertaken in the future to address these three issues as the way to move forward in order to ensure that Musharakah is able to demonstrate the idea of risk sharing and eventually upholding the justice as required by the Shariah.Jabatan Kemajuan Islam Malaysia (JAKIM) under the Prime Minister Department of Malaysia