Governance mechanisms and earnings management practices in Malaysian public listed firms
Corporate management misconducts have caused many corporate failures, most of which involving earnings manipulation. The resulting corporate failures have raised questions related to the effectiveness of corporate governance mechanisms (CGM) in curbing management’s manipulation of financial reports....
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| Format: | Thesis |
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2023
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| Summary: | Corporate management misconducts have caused many corporate failures, most of which involving earnings manipulation. The resulting corporate failures have raised questions related to the effectiveness of corporate governance mechanisms (CGM) in curbing management’s manipulation of financial reports. The Malaysian Code on Corporate Governance encourages corporations to go above and beyond when it comes to corporate governance. This study was conducted with the aim to explore the effect of internal and external governance mechanisms in predicting earnings management. Specifically, this study examines the following factors in relation to earnings management: external audit quality, audit and board committees, internal control disclosure, quality of accounting practice, leadership and organisational structure. Corporate data of listed firms on Bursa Malaysia covering financial periods of 2011 to 2021 were used to examine the research hypotheses. The analytical method used in the current study was descriptive statistic and panel corrected standard error (PCSE) methods of panel regression through STATA version 17. Five models were used to estimate earnings management practices. Findings provide support on the effectiveness of the following governance mechanisms: independent specialised auditor T, audit reputation, audit opinion, internal control system disclosure, audit committee size, audit committee meetings, audit committee financial expertise, remuneration committee, supervisory board size, management compensation, family ownership and foreign ownership. On the contrary, gender composition, nomination committee, timely loss recognition, value relevance, corporate volunteer disclosure, corporate risk disclosure were found to be ineffective in predicting earnings management. |
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