The influence of ethnicity on the reporting of intellectual capital

In the 21st century, Intellectual Capital (IC), which comprised of human, structural and relational capitals, has become a source of predictors for future performance. The role of IC for future performance prediction surpasses traditional measures, such as physical and fi nancial capital. This study investigates whether the ethnicity of directors, which include chief fi nancial offi cers, chairman and audit committees, infl uences the amount of IC disclosure at the fi rm level. This study adopts a quantitative research approach, whereby level of IC disclosure is measured based upon the content analysis of corporate annual reports from 77 technology based companies in Malaysia. Malaysia is used as the setting for this study due to its ethnic diversity and the fact that the ethnic groups, to some extent, maintain their original cultural values. A ranked regression of normal scores is utilized to examine the relationship between the levels of IC disclosure and ethnicity. The study fi nds that a signifi cant relationship exists between ethnicity of some directors and levels of IC disclosure

Pengurusan perolehan: Peranan kualiti audit dan urus tadbir korporat

This study has investigated certain corporate governance characteristics, which include independence of board of directors, accounting skill and knowledge of audit committee, and managerial equity ownership, and the relationships between theses characteristics and earnings management. In addition, this study has also examined the role of audit quality as an independent variable as well as a moderating variable. The sample consists of 812 and 868 companies that have been listed on both the First and Second Boards of Bursa Malaysia for the years 2001 and 2002, respectively. In this study, the dependent variable is the discretionary accruals. The agency theory is used to explain the relationships between variables. Results show that independence of board of directors has a significant relationship with discretionary accruals. It was also observed that there was a significant negative relationship between accounting skill and knowledge of audit committee, and discretionary accruals.These findings indicate that the board of directors’ independence and audit committees’ accounting skill and knowledge are important factors in curtailing earnings management practices. The results of a regression analysis also indicate that audit quality has a significant negative relationship with discretionary accruals. This finding is consistent with the theory which states that high quality audit reduces agency costs resulting from the separation between ownership and company management. Overall, results of this study provide an explanation for the importance of both internal and external mechanisms of corporate governance in strengthening the monitoring of the company

The Impact of Assets Disposal and Economic Crisis on the Valuation of Asset Write-offs

The financial crisis that occurred in Malaysia in the last decade followed by a series of corporate restructuring exercises trigger some fi rms to write off assets value. The incentives to write off may come from signalling future distress, current restructuring exercises,  or  taking  the  opportunity  to  blame  the  crisis.  This  scenario  creates  an  opportunity  to  investigate  the  market  reaction  on  different  causes  of  asset  write-off  during  a  crisis  period  which  is  not  found  in  prior  studies.  This  paper  examines  the  effect of specifi c events such as asset disposal and economic crisis on the valuation of asset  write-offs.  Asset  write-offs  related  to  disposal  of  assets  (likely  to  be  associated  with streamlining business activities) and economic crisis (a factor beyond the control of the fi rm) are expected to receive less negative impact from the market compared to write-off events not associated with a disposal or crisis. The data consists of listed non-fi nancial fi rms on Bursa Malaysia (3,301 fi rm-years) from fi nancial year 1990 to 2000. A  multivariate  regression  model  is  used  to  test  the  prediction.  We  fi  nd  results  which  are not consistent with the predictions. One possible reason that can explain the results is  that  the  market  interprets  asset  write-offs  to  be  associated  with  big-bath  activities  which subsequently would result in more discounts attached to such write-off

Kerelevanan maklumat Rizab Penyamaan Keuntungan dalam syarikat induk perbankan Islam di Malaysia

Rizab Penyamaan Keuntungan (RPK), ialah peruntukan rizab daripada keuntungan semasa keadaan baik untuk digunakan dalam keadaan pasaran yang tidak begitu baik. Dalam institusi kewangan Islam, konsep perkongsian keuntungan digunakan dalam kebanyakan kontrak kerana faedah atau riba’ tidak dibenarkan. Apabila pulangan dalam institusi kewangan konvensional yang berasaskan kadar yang tetap adalah tinggi, terdapat kecenderungan bagi institusi kewangan Islam (sebagai Mudharib) untuk mengorbankan bahagian keuntungan yang diperolehinya untuk membayar pulangan yang kompetitif kepada pelaburnya. Justeru, RPK dibenarkan dalam institusi kewangan Islam oleh pihak berkuasa untuk memastikan institusi berkenaan mempunyai rizab yang cukup untuk digunakan pada ketika prestasi yang tidak begitu baik, dan mengekalkan pelanggannya. Walaupun kajian lepas mendapati pelabur mendiskaun harga saham akibat daripada amalan pengurusan perolehan, manfaat kelebihan bersaing kepada institusi kewangan Islam dengan adanya RPK boleh menterbalikkan atau mengurangkan kesan ini. Jadi, terdapat persoalan sama ada pelabur menganggap maklumat RPK ini sebagai relevan kepada keputusan mereka. Kajian ini memeriksa kerelevanan nilai RPK kepada pelabur. Tambahan lagi, kajian ini juga menyiasat kesan peraturan baharu untuk RPK yang telah dikuatkuasakan oleh Bank Negara Malaysia (BNM) pada tahun 2011. Peraturan baharu ini mencadangkan pelakuan perakaunan yang berbeza antara peruntukan yang dibuat oleh pelabur dan Mudharib yang memberi kesan terhadap penyata kewangan dan akhirnya pertimbangan pelabur. Menggunakan data syarikat induk bank tersenarai di Bursa Malaysia dari tahun 2001 ke-2014 iaitu 102 pemerhatian, dapatan kajian menunjukkan peruntukan RPK berkait secara negatif kepada harga saham. Hubungan ini lebih kuat selepas penguatkuasaan garis panduan yang baharu. Selari dengan kajian lepas, ini mencadangkan RPK dipandang sebagai alat untuk mengurus perolehan. Implikasinya, pihak penggubal undang-undang harus memandang serius dalam keputusan sama ada untuk memberhentikan atau meneruskan amalan peruntukan RPK ini. Walaupun tujuannya baik, ia berpotensi disalahgunakan oleh pihak pengurusan untuk mengurus perolehan dan pulangan bank. Berikutan penggunaan garis panduan baharu pada tahun 2011, perkaitan RPK dan harga saham adalah semakin kuat

The influence of corporate governance on relational capital disclosure among high growth technology companies / Norman Mohd Saleh and Saiful Bakhtiar Masduki

This study examines the relationship between corporate governance elements and relational capital disclosure. This study analyses 229 annual reports of companies in the technology industry that are listed on the Main and ACE Market of Bursa Malaysia. The results indicate that multiple directorships, institutional and government ownerships positively affect relational capital disclosure. Managerial ownership, on the other hand, reduces the incentives of the management to signal such information. In addition, we also find younger companies to have more incentives to disclose relational capital information compared to more established companies. Contrary from past research, this study used a conceptual model developed based on network theory that suggests companies have an incentive to increase their competitive advantage by increasing network between organizations. This study is the first of its kind that specifically investigates the association between relational capital disclosures with the corporate governance practices. The results highlight that important corporate governance determinants of relational capital disclosure can be predicted when signaling intention of the board and network arguments are considered. The findings are useful for regulators in emerging countries characterized by highly networked economy, whereby, business and personal networks are important for company sustainability

Controlling shareholders’ networks and related party transactions: moderating role of director remuneration in Malaysia

Past research argued that controlling shareholders can use their power of control to influence their networks via proxy (CSProxy) and multiple-directorship (CSMulti) to engage in related party transactions (RPT). Thus, we examine the associations between CSProxy and CSMulti, and RPTs. Additionally, directors are rewarded with remunerations, and therefore, director remuneration may be effective in minimizing agency conflict. Thus, we examine the impact of director remuneration as a moderator of the relationships between CSProxy and CSMulti, and RPT. The hypotheses are tested using a sample that consists of 622 listed companies in Malaysia over the period 2012-2014 with a total of 1,866 observations. CSProxy and CSMulti are found to have positive associations with RPTs. We also find that director remuneration is significant in moderating the CSProxy and CSMulti, and RPT relationships. This evidence suggests that director remuneration is an effective monitoring cost to minimize the abuse of RPTs by opportunistic controlling shareholders via their networking, CSProxy and CSMulti. It raises the concerns of the regulators and policy makers that controlling shareholders may utilize their posts, power, position and networks to opportunistically expropriate firm resources. Firm’s remuneration committee has to understand the importance of determining attractive remuneration that fulfils directors’ expectation and satisfaction

Financial Information Quality And Investment Efficiency: Evidence From Malaysia

This study aims to empirically examine the association between financial information quality and investment efficiency among firms in Malaysia. Sample of this study consists of 558 firms listed on the Main Board of Bursa Malaysia from the year of 2001 until 2011. The investment efficiency is measured based on firms’ deviations from the expected investment level. The financial information quality is measured based on four different measurement schemes. The results provide support that financial information quality is significantly positively related to investment efficiency. The inclusion of several firm level control variables and use of alternative models to measure investment efficiency provides consistent findings. The results of this study provide further understanding and empirical evidence relevant to quality of financial information and investment efficiency. As most of the extant studies on this association have been done on data from the US and advanced countries, this study fills the gap in literature by investigating the impact of financial information quality on investment efficiency in an emerging market. Although emerging markets make up the vast majority of economic activity around the world, they have received limited attention in academic research. Findings of this study could be of interest to the international organisations such as World Bank whose missions are to aid countries with developing and transitional economy, and improve living conditions of their citizens

Controlling shareholders’ proxy and multiple directorships : insight evidence from related party transactions

This study examines the association between controlling shareholders’ networks (i.e., controlling shareholders’ proxy (CSProxy) and controlling shareholders’ multiple-directorships (CSMultiD)) and related-party transactions (RPTs), particularly involving controlling shareholders’ interests (RPT-conflict). This study also examines the impact of interaction between CSProxy and CSMultiD on firm engagement with RPTs, and RPT-conflict. The hypotheses are tested using a sample of 548 listed companies in Malaysia over the period 2012-2014 with a total of 1,550 observations. The results show that CSProxy is not associated with RPTs, and RPT-conflict. The CSMultiD is also not associated with RPTs. However, it has a positive relationship with RPT-conflict. Additionally, an interaction between CSProxy and CSMultiD increases the likelihood of firms to engage and disclose more RPTs; in contrast, it discloses lower magnitude of RPT-conflict. The opportunistic controlling shareholders may exploit their conflict of interest for private benefits by hiding their intention behind the RPTs. Overall, these findings provide partial empirical support to the argument that controlling shareholders seek to use their network relationship to influence firms to engage with related parties. These findings raise concerns to the regulators and policy makers, specifically on the ability of the controlling shareholders in utilizing their position and networks opportunistically to expropriate firm resources for personal purposes

Underinvestment and value relevance of earnings management

The aim of this study is to examine whether earnings management among underinvestment firms is positively related to share price. Firms are said to have high growth opportunity but is unable to fund investment projects due to liquidity constraints because of the information asymmetry between the firm and the investors. As a result, firms have to provide high quality accounting information (i.e. value relevant information) to reduce information asymmetry and hence be free from liquidity constraints. One type of accounting information that can be provided is discretionary accrual (proxy for earnings management). The sample of this study is firms listed on the Main Board of Bursa Malaysia from year 2001 to 2007. We use Ohlson’s model to examine the value relevance of earnings management. We separate earnings into managed and unmanaged earnings. Panel data regression analyses were performed to examine the role of underinvestment on the relationship between earnings management and share price. We also examine the value relevance of earnings management using the return model. The results from the panel data regression analysis indicate that earnings management increases the value relevance of accounting information. Further, underinvestment moderates the relationship between earnings management and share price. Nevertheless, the results suggest that earnings management among firms can decrease the value relevance of accounting information. In general, it is concluded that underinvestment weakens the relationship between earnings management and share price/return, hence it motivates managers to convey opportunistic earnings management

Pengurusan Perolehan: Peranan Kualiti Audit dan Urus Tadbir Korporat

Kajian ini meneliti beberapa ciri tadbir urus korporat termasuk kebebasan lembaga pengarah, kemahiran pengetahuan perakaunan jawatankuasa audit, pemilikan ekuiti pengurusan dan hubungannya dengan pengurusan perolehan. Kajian juga turut melihat peranan kualiti audit sebagai pembolehubah tidak bersandar dan pemboleh ubah penyederhana. Sampel kajian terdiri daripada 812 buah syarikat bagi tahun 2001 dan 868 buah syarikat tahun 2002 yang tersenarai di Papan Utama dan Papan Kedua Bursa Malaysia. Dalam kajian ini, akruan boleh pilih merupakan pemboleh ubah bersandar. Teori agensi digunakan untuk menerangkan hubungan di antara pemboleh ubah kajian. Hasil kajian mendapati kebebasan lembaga pengarah mempunyai hubungan negatif yang signifikan dengan akruan boleh pilih. Hasil kajian ini juga menunjukkan hubungan negatif yang signifikan di antara kemahiran pengetahuan perakaunan jawatankuasa audit dan akruan boleh pilih. Penemuan ini menunjukkan kebebasan lembaga pengarah dan kemahiran pengetahuan perakaunan jawatankuasa audit merupakan faktor penting dalam membataskan kejadian pengurusan perolehan. Hasil analisis regrasi mendapati hubungan negatif yang signifikan di antara kualiti audit dengan akruan boleh pilih. Penemuan ini adalah konsisten dengan teori yang menjelaskan pengauditan berkualiti tinggi dapat mengurangkan kos agensi yang wujud kesan daripada pemisahan di antara pemilikan dan pengurusan syarikat. Hasil kajian ini menjelaskan bahawa mekanisma dalaman dan luaran tadbir urus korporat adalah sama penting bagi memperkukuhkan pengawalan sesebuah syarikat.