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Corporate governance and earnings conservatism in Malaysia

Author

Listed:
  • Marziana Madah Marzuki
  • Effiezal Aswadi Abdul Wahab
  • Hasnah Haron

Abstract

Purpose - This paper aims to investigate whether the revised Malaysian Code on Corporate Governance in 2007 enhances earnings conservatism. In addition, the authors examine the relationship between board of directors’ expertise and conservatism. The third objective is to investigate the relationship between audit committee characteristics and earnings conservatism. Design/methodology/approach - The sample of this study is based on 3,183 firm-year observations for a period of 2004-2009. The authors hand collected the corporate governance variables, whereas the remaining data were extracted from Compustat Global. The authors used two measures of conservatism. The first is the market-based model by Basu’s (1997), and the second measure is the accrual-based measure by Ball and Shivakumar (2005). Findings - The authors find that the revision of Malaysian Code on Corporate Governance 2007 results in improving earnings conservatism. The authors find two audit committee characteristics, namely, audit committee financial expertise and independence increase earnings conservatism, after 2007. However, the authors could not find support whether board financial expertise mix affect conservatism. Research limitations/implications - This study did not consider other possible corporate governance variables that could influence earnings conservatism, as it would be a difficult task to gather them. Originality/value - The authors provide evidence on the role of corporate governance and earnings conservatism in Malaysia.

Suggested Citation

  • Marziana Madah Marzuki & Effiezal Aswadi Abdul Wahab & Hasnah Haron, 2016. "Corporate governance and earnings conservatism in Malaysia," Accounting Research Journal, Emerald Group Publishing Limited, vol. 29(4), pages 391-412, November.
    • Handle: RePEc:eme:arjpps:arj-04-2014-0043
    DOI: 10.1108/ARJ-04-2014-0043
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    Citations

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    Cited by:

    1. Bilal, & Chen, Songsheng & Komal, Bushra, 2018. "Audit committee financial expertise and earnings quality: A meta-analysis," Journal of Business Research, Elsevier, vol. 84(C), pages 253-270.

    More about this item

    Keywords

    Malaysia; Corporate governance; Earnings conservatism; MCCG 2007; M41; M48; G34; G38;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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