The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies

The collapse of a number of companies as a result of accounting manipulation by managers has raised serious questions about the effectiveness of the monitoring mechanism to protect investors’ interests and control managerial opportunistic behavior. This study examines financial performance, envir...

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Main Author:	Sulaiman, Mahanum
Format:	Thesis
Language:	English
Published:	2014
Subjects:	HD28-70 Management Industrial Management
Online Access:	http://eprints.usm.my/58798/1/Mahanum%20Sulaiman-%20The%20Association%2024pages.pdf
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id	my-usm-ep.58798
record_format	uketd_dc
spelling	my-usm-ep.587982023-06-14T08:50:46Z The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies 2014-03 Sulaiman, Mahanum HD28-70 Management. Industrial Management The collapse of a number of companies as a result of accounting manipulation by managers has raised serious questions about the effectiveness of the monitoring mechanism to protect investors’ interests and control managerial opportunistic behavior. This study examines financial performance, environmental characteristics and governance mechanisms on fraudulent financial reporting in Malaysia. Logit regression was performed on a sample of 36 fraud firms and 46 nofraud firms for the period of 2001 to 2009. The predictive accuracy of the logistic regression model is 66.1 percent. This study found that the greater the direct shares of the company owned by the board of director, the lesser would be the likelihood of fraudulent financial reporting. High stock ownership of board of director will increase the firm value, thus eliminating some of the inherent agency conflicts between the management and shareholders which is related to managers making decisions to benefit themselves rather than the shareholders. This study also found that the shorter the tenure of the CEO, the greater the tendency of the company to be involved in fraudulent financial reporting. Even though the internal control quality was found not to contribute significantly to fraudulent financial reporting, it was found that fraud companies, have lesser voluntary disclosure of internal control system compared to no-fraud companies. It is suggested that the Securities Commission and the Malaysian Institute of Accountants should encourage a greater level of voluntary disclosure of internal control system by all public listed companies, board of director to own greater number of shares in companies and CEO is encouraged to have a longer tenureship. Length of CEO tenureship is recommended to be 9 years or more as findings have shown that CEO with 9 years or more tenure is found to commit less in fraudulent financial reporting. This can also be included in Bursa Malaysia Listing Requirement (BMLR). 2014-03 Thesis http://eprints.usm.my/58798/ http://eprints.usm.my/58798/1/Mahanum%20Sulaiman-%20The%20Association%2024pages.pdf application/pdf en public phd doctoral Universiti Sains Malaysia, Pusat Pengajian Pengurusan
institution	Universiti Sains Malaysia
collection	USM Institutional Repository
language	English
topic	HD28-70 Management Industrial Management
spellingShingle	HD28-70 Management Industrial Management Sulaiman, Mahanum The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies
description	The collapse of a number of companies as a result of accounting manipulation by managers has raised serious questions about the effectiveness of the monitoring mechanism to protect investors’ interests and control managerial opportunistic behavior. This study examines financial performance, environmental characteristics and governance mechanisms on fraudulent financial reporting in Malaysia. Logit regression was performed on a sample of 36 fraud firms and 46 nofraud firms for the period of 2001 to 2009. The predictive accuracy of the logistic regression model is 66.1 percent. This study found that the greater the direct shares of the company owned by the board of director, the lesser would be the likelihood of fraudulent financial reporting. High stock ownership of board of director will increase the firm value, thus eliminating some of the inherent agency conflicts between the management and shareholders which is related to managers making decisions to benefit themselves rather than the shareholders. This study also found that the shorter the tenure of the CEO, the greater the tendency of the company to be involved in fraudulent financial reporting. Even though the internal control quality was found not to contribute significantly to fraudulent financial reporting, it was found that fraud companies, have lesser voluntary disclosure of internal control system compared to no-fraud companies. It is suggested that the Securities Commission and the Malaysian Institute of Accountants should encourage a greater level of voluntary disclosure of internal control system by all public listed companies, board of director to own greater number of shares in companies and CEO is encouraged to have a longer tenureship. Length of CEO tenureship is recommended to be 9 years or more as findings have shown that CEO with 9 years or more tenure is found to commit less in fraudulent financial reporting. This can also be included in Bursa Malaysia Listing Requirement (BMLR).
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Sulaiman, Mahanum
author_facet	Sulaiman, Mahanum
author_sort	Sulaiman, Mahanum
title	The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies
title_short	The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies
title_full	The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies
title_fullStr	The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies
title_full_unstemmed	The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies
title_sort	association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from malaysian listed companies
granting_institution	Universiti Sains Malaysia,
granting_department	Pusat Pengajian Pengurusan
publishDate	2014
url	http://eprints.usm.my/58798/1/Mahanum%20Sulaiman-%20The%20Association%2024pages.pdf
_version_	1776101230944190464

The association between financial performance, environmental characteristics, corporate governance mechanism and fraudulent financial reporting : evidence from Malaysian listed companies

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