The failures of corporations such as Enron, WorldCom and HIH Insurance, to name but a few, have heightened investor awareness of the need to not only evaluate company performance, but also to consider the possibility that financial statements may not be a true reflection of company results, as fraudulent activities may have occurred during the reporting period. Since parties who are outside of the firm do not have access to pertinent information, they have to rely upon published financial and non-financial data to form an opinion regarding performance and/or the risk that fraudulent activities may have occurred. The prior literature shows a relationship between weak corporate governance and fraudulent activities, although most if not all of this research relates to Western economies. The differences in institutional setting e.g. cultural values and legal environment in Malaysia would not give the same findings with the study in western economies. Composing of many ethnicities, Malaysia is a multicultural country. With each ethnic group upholding its own culture, values and belief, businesses are conducted according to each ethnic’s culture. The results of this study could shed some light on the influence of institutional setting regarding corporate governance. Companies that were charged with accounting and auditing offences from year 2003 to 2007 were selected as the fraudulent samples. Data was collected from the years these companies were charged with fraud and the year prior to that. Logistic regression analysis was carried out to determine the significant differences between fraudulent and non-fraudulent companies with respect to corporate governance characteristics. The results indicated that the size of the board and the percentage of institutional shareholdings had significant relationships with the likelihood of corporate fraud occurrences consistently across the two-year period studied. The results of this study will assist public, corporate and accounting policy makers in formulating more effective corporate governance mechanisms.

Many studies have examined the effect of relational capital on SMEs. However, most studies were done in SMEs, not specific by sectors or industries. Relational capital is expected to have a different impact on the services sector due to its unique characteristics. Moreover, for SMEs to achieve a competitive advantage, SMEs in the service sector need to utilize the knowledge sharing and resources they possess fully. Due to this lack, this study aims to examine the relationships between relational capital and the performance of service SMEs in Malaysia. The survey questionnaire distributed to the SME managers consists of demographic profiles of the respondents and firms' characteristics and items measuring relational capital, including customers, suppliers, distribution channels, the government, and financial institutions. This study revealed that relational capital measured by customers, suppliers, partners, distribution channels, and financial providers significantly influence SMEs' economic and financial performance. Therefore, the findings suggested that the owner or manager of SMEs in the service industry should invest in building and maintaining close relationships with the networks to continuously serve the nation and contribute to the economies.