Board mechanisms and Malaysian Family Companies' Performance

Many overseas studies discussed the topic of corporate governance and performance in family companies, however, few studies have been conducted in Malaysia. The objective of this paper is to examine the board mechanisms and family companies’ performance using three performance indicators (Tobin’s Q, Earnings Per Share & Operating Cash Flow). The sample size is 189 family companies listed on Bursa Malaysia from 2003 to 2007. The findings from this study reveal that some of the board mechanisms influence family companies’ performance. This study evidenced that family companies with a large board size, low directors’ expertise and duality leadership contribute to higher family companies’ performance. However, this study found that the academic qualification of directors does not influence firm performance. Therefore, generally, regulators and investors need to be sensitive to the fact that family companies do have differences in corporate governance practices compared to non-family companies

The relationship between non-audit service fees and audit fees in the banking sector in Malaysia

The issue of audit fees and non-audit fees charged by the audit firms has been discussed regularly in accounting and auditing literature. Recently, due to the corporate scandals in United States, the issue is discussed together with a host of revelations about audit failures that led to the companies’ demise. The auditing profession is being badly blamed and some suggest that this could be due to the audit firm’s reliance more on non-audit services rather than the audit itself. Therefore, this study attempts to probe the situation in Malaysia using the banking sector as the subject of interest. Specifically, it tries to examine the impact of non-audit services conducted by audit firms to these banks on audit fees. The results showed that the variable of non-audit fees is statistically significant in determining audit fees as predicted. Further sensitivity analysis showed that the results are robust to different measurements and company size

Inside and outside shareholders and monitoring: evidence from developing country

This paper tests the effect of managerial (inside) and block-holders (outside) ownership in relation to agency theory in Malaysian business environment. This study tests the agency relationship in different culture and social contact and provides evidence whether agency theory in non-western organizations have equal impact in Asian organizations. Consistent with agency theory and the convergence of interest hypothesis, managerial ownership (insiders) in Malaysia indicate a negative relationship with the demand for monitoring. This finding may be due to the fact that as the managers are also the owners, there is less conflict, less information asymmetry and less hierarchical organization structure in the companies, which lead to lower monitoring costs. However, another ownership structure, outside block-holders appear to demand more monitoring. This positive relationship may be explained by their effort to compensate their lack of involvement in the daily transactions and internal decisions of the company, especially in the concentrated business environment in the country

Institutional ownership and market-based performance indicators: Utilizing generalized least square estimation technique

This study investigates the relationship between institutional ownership and company performance of public listed companies in Malaysia.Three years panel data of 730 Malaysian public listed companies were examined.The results showed that institutional ownership had positive and significant relationship with Tobin's Q and share price.Therefore, the involvement of institutional investor in monitoring and controlling activities reduced agency conflict and enhanced corporate performance in the emerging economy

Block-holders and monitoring mechanisms in Nigeria

Companies continue to fold up after the global economic melt-down of 2008 starting with the Enron saga. One of the reasons offered by practitioners and intellectuals in their search for the cause and solution to the problem is information asymmetry between the managements and the shareholders. It is extremely necessary ever since the sagas and continuous business failures and financial distress in Nigeria, in particular, to focus on monitoring mechanisms (MM), especially in Sub-Saharan countries. In addition, it is essential to understand the factors relating to MM as it cannot work in isolation. The purpose of this study is therefore to examine the extent to which block-holders impact on MM using the annual reports of 111 Nigerian non-financial listed companies in the context of agency theory. In addition, data were collected from the companies in respect of their internal auditing using the questionnaire as these are not available in the annual reports. The findings provide evidence that the block-holders significantly relate to monitoring mechanisms. Thus, this paper provides a new knowledge regarding monitoring mechanisms and its antecedents (directorship, internal and external auditing). These findings are with policy implications for the board of directors to implement their monitoring responsibilities. The findings also suggest policy implications for the internal and external auditors. The findings are useful for further review of corporate governance guidelines by the regulatory agencies and government. The paper contributes to knowledge in Sub-Saharan Africa, Nigeria in particular by examining block-holders in relation to the aggregate cost of monitoring mechanisms (directorship, internal and external auditing)

Auditor tolerance of accrual-based and real earnings management in boardrooms of politically connected Nigerian firms

This study examines the accrual-based and real earnings management tolerance of auditors in boardrooms of politically connected companies using auditor reputation theory and auditor litigation risk as the theoretical framework. Using a sample of 89 Nigerian listed companies during the period from 2008 to 2013, the study finds that auditors tolerate more accrual earnings management and less real earnings management in companies that are politically connected. In addition, the study finds a complementary relationship between real earnings management (REM) and abnormal earnings management (ABD) in companies that are politically connected. The findings of this study have serious implications for regulators, particularly following the various corporate governance scandals that have affected the integrity of financial information

Operating Performance Analysis and Goods Service Tax Implementation in Malaysia

The implementation of Goods Service Tax (GST) in business processes requires firm to revise their business policies and practices particularly on price setting and cash flow operation that may possibly influence the operating performance. Thus, the purpose of this study is to investigate the impact of GST on operating performance. This study investigated 265 Malaysian listed firms operating performance (profitability: sales growth SG, profit after tax-PAT, return on asset (ROA), liquidity: operating cash flows (OCF) and current ratio CR) from year 2014 (before), 2015 (during) and 2016 (after) GST implementation period using the paired t-test. The SG have shown decreased during the GST implementation period, subsequently improved after the GST implementation period. The CR has exhibited a remarkable improvement during and after GST implementation period. The SG and CR results validate the firms are able to maintain the operating performance even with minimal reduction is witnessed for PAT, ROA and OCF during and after GST implementation. This study contributes to all stakeholders that GST do not necessarily influence the firms negatively, but allows the management of the firm in making effective decision for the operating business processes and supply chain for sustaining the firm value. In sum, this study finds that GST is a business friendly tax system for firms with effective operating performance to support the country economic development

Application of principal component analysis on equity valuation multiples: Evidence from Malaysian firms

Investment analysts often used equity valuation multiples to assess the performance of stocks in relation to likely future return to shareholders. Valuation multiples used by analysts are price to earnings, price to book value, price to cash flow and price to sales multiples. However, researchers have argued that correlation exists between the multiples hence assessing them individually and later merging them to one multiple results to reduplication.This study employed the principal component analysis (PCA) method to condense the four equity valuation multiples (EVM) of 223 randomly selected listed firms in Malaysia for the period of 2008-2013. The PCA result reveals that three (3) components explained 99% of the total variables variance. Suggesting that, the three components (price to earnings, price to book value and price to cash flow multiples) can satisfactorily explain all the EVMs.The implication is that strong correlation exists between EVMs of Malaysian firms.Therefore, the study recommends the application of principal component analysis methodology in the analysis of the equity valuation multiples because of correlation that exists between the valuation multiples. The study is limited to EVMs, entity valuations are not covered in the study.Applying PCA to equity valuation multiples ensures accuracy and reliability of result interpretation due to absence of multicolearity in the decomposed principal component

A theoretical framework on the relationship between political connection, board characteristics and environmental disclosure in Nigeria

The poor environmental performance and by extension low level of environmental disclosure evident in the annual reports of quoted Nigerian companies have aroused stakeholders concern about the condition of the environment.The main objective of this study is to x-ray the relationship between political connection, board characteristics and environmental disclosure. The quantitative approach will be adopted using data from the annual reports of the sampled companies. The theoretical framework is built on the legitimacy theory with support from the agency and managerial power theory.It is envisaged that the study will engage corporate organizations to adequately provide for environmental information in their internal policies.The study will facilitate environmental cost reporting responsiveness and disclosure to investors and environmental regulatory bodies

A Conceptual Paper on Impact of Corporate Governance on Operating Performance during Goods Service Tax Implementation in Malaysia

The purpose of this conceptual paper is to address the link between corporate governance and operating performance during and after GST implementation. With the support of agency theory, this paper develops six propositions to the relationship between corporate governance and operating performance (SG and CR) during and after GST implementation. The nature of their relationship shall contribute to all stakeholders on the impact of corporate governance to operating performance. This displays on the governance effectives in discharging their roles to strengthen operating performance particularly during a new financial or tax policy implementation that requires necessary changes in business processes. It uncovers the transparency of Malaysian corporate governance commitment and acceptance to GST for firm and country sustainable development. In sum, for business friendly GST requires effective governance to support the firm operating system