Retirement benefit plans: Accounting disclosures and stock returns

Given that Malaysian companies have to adhere to the new standard regarding Retirement Benefit Reporting (FRS 119) for their 2003 financial statements and thereafter, this study seeks to find out the disclosure practices before and after the effective date of introducing the new standard. The findings show that 36 companies complied with FRS 119 before the effective date and 166 companies complied with the FRS 199 after the effective date.It is worth finding that the extent of disclosures of FRS 119 has improved after the effective date especially the disclosure on method of actuarial valuations, total expense recognized in the income statement and the principal actuarial assumptions.This study also finds that there is a marginally significant association between the type of retirement benefit plans and firm specific characteristics that are firm size and type of industry.On the other hand, this result reveals that the Cumulative Market Adjusted Return (CMAR) is positive and significant for both the early and non-early adopters

The CMAR and extent of compliance with IFRS 101 standard among Malaysian ace market companies

Malaysia is on the track to achieve full convergence and adoption of the International Financial Reporting Standards (IFRSs) by 2012. This study seeks to find out the extent of compliance with IFRS 101 ‘Presentation of Financial Statements’ before the effective date.Using total disclosure index (TDI), the findings shows that most of Malaysian Ace Market companies have complied with IFRS 101.The present study also indicates that the Cumulative Market Adjusted Return (CMAR) is positive and significant for both partial and full compliance of IFRS 101 among the Malaysian Ace Market companies. Multivariate regression analysis further provides a lack of significant association between CMAR and announcement of earnings (i.e. EPS).Nevertheless, the percentage of independent directors on the board (BDIND) is found to be a positive and a significant corporate governance variable that associates with CMAR.These findings imply that policy makers and regulators should encourage Ace Market companies to have the most optimal number of independent board of directors for future improvements of CMAR

To Buy or not to buy the equity of Nestle Malaysia Berhad

Amira Lee has been newly appointed as a financial analyst for Melati Investors Berhad.Being an analyst, she is given a task to provide recommendation whether to buy or not to buy the equity of Nestlè Malaysia Berhad.Amira’s consideration whether to buy Nestlè’s equity or not, was not quite straightforward task because she might have to look at more than one year financial statements and apply dividend discount model to value the equity.If she could not made her decision within a week, Melati Investors Berhad may lose the opportunity to buy equities of Nestle (i.e. larger and long-established companies that would have probably paid higher dividends) given that the closing date of trading the equities will be due in next seven days

The Value Relevance of Asset and Liabilities after Adoption of IFRS among Nigerian Financial Institutions

This study discusses and examined the value relevance of assets, liabilities and non-performing loans among Nigerian banks after the adoption of IFRS. Nigerian government mandated all listed firms to adopted IFRS effective January 1, 2012.  Nigerian banks were in financial crisis during the period of 2008 to 2009 because of poor accounting reporting, non-performing loans and non-disclosure of accounting information. Ohlson 1985 model has been adopted for the study. Nigerian been emerging market with a lot of imperfections in the market has provide a value relevance results of accounting numbers. The three variables total assets and liabilities and non-performing loans have been found to have association with share prices. The study shows that total assets and non-performing loans to have a positive relationship with share price and provide more value relevance after the adoption of IFRS. However, total liabilities provide a significant negative relationship with value relevance of accounting information after the adoption of IFRS. This study provides readers with detail picture of value relevance in emerging market like Nigeria and contributes to the emerging markets study on capital markets. This paper has demonstrated that emerging countries in African can provides explanations on the association between accounting numbers and stock prices. Keywords: Value relevance, disclosures, financial institutions, IFRS, capital marke

Delayed goodwill impairment charges: An examination of the declined market capitalization

This study has two main objectives.First, it examines the extent to which the declined in the market capitalization below the book values of the net assets represents an appropriate proxy for an indication that goodwill may be impaired by listed companies in Malaysia, as an example of listed companies in an emerging market.Using the findings from the first research objective, this study explores cases of late reporting of goodwill impairment losses. Results show that as a stand-alone, the declined in the market capitalization is not an ideal proxy for an indication that goodwill may be impaired, as it does not fully reflect the condition of the cash-generating-units containing goodwill, disclosed in the Notes to the financial statement.However, when the declined in the market capitalization is examined in relation to financial performance of companies and their segment results, it becomes a useful starting point in identifying cases of late reporting of goodwill impairment losses.The study provides important implications for policy makers and relevant authorities, in that, to enhance the quality of financial reporting, the relevant authorities need to closely monitor the disclosure of goodwill impairment by listed companies in the emerging market of Malaysia

Pension accounting disclosures and stock market reactions

The Malaysian Accounting Standard Board ‘MASB’ issued FRS 119 ‘Employee Benefits’ which became effective for periods beginning on or after 1 January 2010. This standard is further superseded by MFRS 119 (i.e. as amended by IASB in June 2011) with effect from 1 January 2013. Hence, the present study provides evidence on the practice of pension accounting disclosures after the implementation of FRS 119 ‘Employee Benefits’ and their stock market reactions ‘cumulative market adjusted return’.The study reveals that seventy (70) companies have adopted Defined Benefit (DB) pension schemes based on the annual reports for the year 2009.Among these companies, seven (7) companies have pension assets disclosures while another 63 companies pension liabilities disclosures.The pension accounting disclosures related to actuarial gains and losses are only provided by 29 Malaysian companies.In addition, multivariate analysis provides interesting results that indicate pension liabilities disclosures are significant variables in relation to CMAR.These findings may suggest that DB pension schemes with high disclosures of pension liabilities are less likely contributing to high value of CMAR.In this context, the users of corporate financial statements could be expected (1) to value the amount of pension liabilities more than amount of pension assets among DB pension schemes adopters; and (2) higher amount of pension liabilities may result in lower CMAR among DB pension schemes adopters in Malaysia.On the other hand, pension assets disclosures which are positively and significantly associated to CMAR indicate that the higher of pension assets disclosed in by DB pension adopters in the financial statements, the higher of CMAR will be offered by Malaysian listed companies.These disclosures of pension asset could help the aging population in planning the retirement needs in the future.In addition, users of financial statements may be worth to be attentive and watchful in relation to the amount of pension assets which are disclosed in the annual reports in order to make decision on buying and selling of company securities

Stock returns and the extent of compliance with IFRS 101 Standard among Malaysian Ace Market companies

Malaysian is on the track to achieve full convergence and adoption of the International Financial Reporting Standards (IFRSs) by 2012.This study seeks to find out the extent of compliance with IFRS 101 ‘Presentation of Financial Statements’ before the effective date.Using total disclosure index (TDI), the findings show that most of Malaysian Ace Market companies have been complied with IFRS 101.The present study also indicates that Cumulative Market Adjusted Return (CMAR) is positive and significant for both partial and full compliance of IFRS 101 among Malaysian Ace Market companies.Multivariate regression analysis further provides a lack of significant association between CMAR and announcement of earnings (i.e. EPS). Nevertheless, percentage of independent directors on the board (BDIND) is found to be positive and significant corporate governance variable that associates with CMAR

The timeliness of financial reporting among Jordanian companies: Do company and board characteristics, and audit opinion matter?

This study investigates the influence of board independence, board size, auditor's opinion, profitability (good or bad news) and industry sector, on the timeliness of annual financial reports among Jordanian companies. It covers 114 listed companies on the Amman Stock Exchange for the year 2012.The timeliness of the financial reports is measured by audit report lag. We find that the firms, on average, take more than two months to complete the audit of financial reporting.Consistent with most studies, we find that firms with improved performance (good news) are faster in publishing their financial reports than firms with declining performance (bad news).The results also show that firms with an unqualified audit opinion release their financial reports earlier than those that do not receive a clean opinion. In addition, firms with a smaller board report faster than those with a larger board. Nevertheless, there is no evidence of the influence of independent directors and type of sector on the timeliness of financial reporting.This study serves as an input to policy makers and regulators in formulating policies and strategies with respect to the timeliness of financial reports

The impact of internal corporate governance on the timeliness of financial reports of Jordanian firms: Evidence using audit and management report lags

This study explores the influence of board independence, board size, CEO duality, board diligence, board financial expertise and presence of audit committee as well as the type of sector on the timeliness of financial reports among selected Jordanian companies.The timeliness of the financial reports is measured by audit report lag (ARL) and management report lag (MRL).This study covers 112 firms listed on the Amman Stock Exchange for the years 2011 and 2012. The results of the ARL model indicate that companies that have members of board who are independent from management take a significantly shorter time to prepare and issue their financial reports. The results indicate that companies with greater number of board of directors are related with a higher audit report lag. The results also show that companies that separated the CEO and chairman's roles are quicker in publishing financial reports than companies combining the roles of CEO and chairman.In addition, boards of directors with more meetings make the audit report lag shorter. The findings also support that argument that the existence of an audit committee could resolve the information asymmetry between management and external auditors that, in turn, would lead to reduced audit report lag and management report lag.However, the results of the MRL model show that management report lag is related positively to large board size and board diligence and negatively to the existence of audit committee.This study concludes that the good structures of corporate governance play a key role in improving the quality of timeliness of financial reports

Does Malaysian Code of Corporate Governance ‘MCCG’ matter among family-controlled firms?

The Securities Commission Malaysia issued the Corporate Governance Blueprint which is later transformed to Malaysian Code on Corporate Governance ‘MCCG’. Minority Shareholders Watchdog Group ‘MSWG’ is participating in the establishment of MCCG components as well as the measurement of best practice of corporate governance by using Corporate Governance’s index in 2009. This index which has two components of internal governance (i.e. disclosures on board of directors’ structure and directors’ remuneration) and external governance (i.e. disclosures on accountability and audit as well as communication with shareholders) could result to an effective monitoring and governance among family-controlled firms. Using MCCG index scores, this study examines the relationship between the components of corporate governance and performance among Malaysian family-controlled firms for the years 2010 and 2011. The regression analysis provide evidence that none of these components are significant except directors’ remuneration disclosures which are negatively related to family-controlled firms’ performance (i.e. ROA, Tobin Q and EVA). These findings indicate that low disclosures of directors’ remuneration are more likely to be related to high performance among family-controlled firms given that more investors may be attracted to invest in the family businesses with low directors’ remuneration than high directors’ remuneration. Hence, the regulators and policy makers may need to consider specific corporate governance code for family-controlled firms in order to lessen the dominance of agency problems