The impact of family-firm structure and board composition on corporate transparency: Evidence based on segment disclosures in Malaysia

The aim of this study is to contribute to the growing literature on the quality of accounting disclosures by family firms by investigating whether the alignment (entrenchment) effect leads to high (low) corporate transparency. Unlike previous studies, this study also examines the relationship between board composition and corporate transparency by distinguishing between the two types of nonexecutive directors, namely independent and affiliated directors. Using the enhanced segment disclosures by Malaysian firms in 2001/2002 as a proxy of corporate transparency, the results indicate that family firms are more inclined to disclose all the required items for the primary basis of segment reporting, consistent with Ali, Chen, and Radhakrishnan (2007) and Wang (2006). The result also indicates that firms with higher proportion of affiliated directors are more likely to make greater segment disclosures. However, no evidence is found to support the contention that independent directors and institutional investors promote corporate transparency, consistent with previous Malaysian studies

The effects of owners' participation and lockup on IPO underpricing in Malaysia

Recent theories of initial public offering (IPO undelpricing depart from the traditional asymmetric information models. Two recent IPO underpricing models are Habib and Ljungqvist (2001) and Brav and Gompers (2003). TheMalaysian IPO market,characterised by high incidence of secondary ogerings and IPO lockup commitments,provides a fertile ground to test the newer theories of IPO underpricing.Examining IPOs between August 1996 and June 2000 in Bursa Malaysia, the evidence lends support to the theoretical predictions that IPO underpricing is negatively related to owners' participation ratio and positively associated with the fraction of directors' shares which is subject to liquidity restrictions

Non-audit Services, Audit Firm Tenure And Earnings Management In Malaysia

The main objective of this study is to investigate the association of auditor-provided nonaudit services and audit firm tenure with earnings management in Malaysian public listed firms. Two measurements, namely, discretionary current accruals based on the performance-adjusted model developed by Ashbaugh, LaFond and Mayhew (2003) and discretionary total accruals based on the modified Jones model (1991), are employed to estimate the level of earnings management. Our sample consists of 525 companies for financial year 2009. The results suggest that longer audit firm tenure reduces earnings management. However, the magnitude of non-audit fees exacerbates earnings management. Based on the empirical evidence, any attempt to legislate audit firm rotation in Malaysia is unwarranted. Further research is required to move toward a policy resolution on the restriction of non-audit services in Malaysia

A descriptive analysis of financial restatements in Malaysia / Ameen Qasem, Norhani Aripin and Wan Nordin Wan Hussin

This study provides an overview of the issue of financial restatements among Malaysian public listed companies by investigating the trend and reasons for financial restatements for the period beginning 2005 through to 2014. Based on the Thompson Reuters DataStream database which provides restatement data for 915 Malaysian companies (9,150 company-year observations), detailed analysis shows that there is a total of 1,945 (21.26%) restatements occurring during the period. The highest number of restatement occurrences was in 2010 with 342 cases (17.58%) while the lowest was in 2008 with 41 cases (2.11%). The majority of restatement cases occurred due to changes in accounting policies with more than 75% of financial restatement cases found within four sectors: industrial products, trading and services, consumer products, and technology. The results of the study will be useful to regulating bodies such as Bursa Malaysia, Securities Commission and Malaysian Accounting Standard Board in as much as they highlight the trend and reasons for financial restatements among Malaysian public listed companies. Further investigation could be conducted for companies that regularly change their accounting policie

GEZ petrol station: Using cost-volume-profit analysis for planning

As an Area Manager of GEZ Bhd, a major oil company in Malaysia, in 2010, Mr Aiman was responsible for directing the sales activities of more than twenty petrol stations in the northern region of Malaysia.He was also responsible to train petrol station dealers and staff, initiate sales promotion and implement key initiatives to improve sales. Despite being a stable business with continuous increase in vehicles, often times, petrol station operators faced with the difficulty of sustaining the business, leading to the termination of the dealership license.The lack of knowledge in finance and costing, among others, contributed to business failures.Realising the importance of management accounting concepts and tools such as cost allocation and CVP analysis, Mr Aiman believed that the dealers and their relevant staff should have the knowledge in cost accounting.They should be able to differentiate between variable and fixed expenses, prepare a financial statement and perform a cost-volume-profit (CVP) analysis.To help the dealers perform the CVP analysis, an understanding of how to build and use a financial model associated with the analysis is an added advantage.In coming up with the data and building the financial model, Mr Aiman sought the assistance of Rizal, a trained management accountant

IPO profit guarantees and income smoothing

A unique feature of the initial public offering (IPO) market in Malaysia during 1996-1999 was the imposition of IPO profit guarantees for a three-year period subsequent to listing on the major shareholders of the newly listed Second Board companies. This study investigated the income smoothing behavior on a sample of 92 IPO companies with profit guarantees, of which 54 of them reported profit guarantee surpluses.For each of the companies, Eckel's income smooting Index (1981) is calculated based on two subperiods i.e.(1) ten-year period comprising five years before and five years after listing and (2)profit guarantee period.The evidence indicates that there is no significant difference in income smoothing between companies with IPO profit guarantee surplus and IPO profit guarantee shortfall for both sub-periods. We argue that the controlling shareholders need not resort to income smooting to avoid the costly profit guarantee shortfall as they could easily seek variations in the original profit guarantee agreement. Further analyses show that income smoothing is more prevalent among smaller companies and construction companies, based on a ten-year period but not the profit guarantee period

Do investment in and the sourcing arrangement of the internal audit function affect audit delay?

This paper investigates the association between the internal audit function attributes and audit delay using a sample of 432 publicly traded firms in Malaysia in 2009. In this unique setting, we capitalize on the publicly available data concerning the investment in and the sourcing arrangement of internal audit function. We find a negative relationship between the costs incurred for the internal audit function and audit delay. However, we do not find any significant association between the internal audit function sourcing arrangements and audit delay. Additionally, we find that greater audit committee independence and longer auditor-client tenure shorten audit delay, and more frequent audit committee meetings and higher misstatements in the preliminary unaudited earnings are associated with a longer audit delay

Non-audit services, audit firm tenure and earnings management in Malaysia

The main objective of this study is to investigate the association of auditor-provided non audit services and audit firm tenure with earnings management in Malaysian public listed firms.Two measurements, namely, discretionary current accruals based on the performance-adjusted model developed by Ashbaugh, LaFond and Mayhew (2003) and discretionary total accruals based on the modified Jones model (1991), are employed to estimate the level of earnings management.Our sample consists of 525 companies for financial year 2009.The results suggest that longer audit firm tenure reduces earnings management.However, the magnitude of non-audit fees exacerbates earnings management.Based on the empirical evidence, any attempt to legislate audit firm rotation in Malaysia is unwarranted. Further research is required to move toward a policy resolution on the restriction of non-audit services in Malaysia

Does accounting method choice for business combination influence IPO valuation?

There are numerous studies that examined the choice of accounting methods by IPO firms as a device to manage earnings prior to going public (Aharony et al.,1993; Friedlan,1994; Neill et al., 1995; Black et al.,2002).This study extends Neill et al.(1995) by examining the association between accounting method choice and IPO valuation in Malaysia.However, instead of using accounting policies that are related to depreciation and inventory ,this study looks at accounting method for business combination namely the purchase vs. merger method.By examining 62 IPOs during 2001 and 2002, the multivariate analysis shows that, consistent with the hypotheses, the liberal accounting method for business combination is positively associated with offer price and negatively associated with first day closing price and underpricing.However, none of the coefficients associated with accounting method are statistically significant.IPO offer price is positively influenced by forecasted earnings, net tangible assets and firm size. First day closing price is significantly influenced by forecasted earnings.IPO consists of exclusively new sham issue (i.e. participation ratio by IPO entrepreneurs equals zero) yields higher underpricing consistent with Habib and Ljungqvist (2001).As expected, another important determinant of IPO underpricing is oversubscription rate with highly oversubscription 1PO generates greater underpricing

The availability, extent and quality of sustainability reporting by Malaysian listed firms: subsequent to mandatory disclosure

The purpose of this study is to examine the availability, extent and quality of Sustainability Reporting (SR) by Malaysian firms subsequent to the mandatory disclosure.Based on an across industry sample of 300 firms in 2011, the results indicate that despite the mandatory disclosure, 3% of the sampled firms failed to make such reporting.Furthermore, in both aspects of extent and quality, human-related sustainability engagement, which consists of the workplace and community themes are found to be the favorite themes to be reported.Meanwhile, firms in the infrastructure, finance and plantation industries perform the best of extent and quality of SR, while firms in hotel industry marks the poorest in quality and lowest in extent of SR