A Descriptive Analysis of Financial Restatements in Malaysia

Qasem, Ameen; Aripin, Norhani; Hussin, Wan Nordin Wan

doi:10.24191/ijsms.v2i2.8073

Cited by 3 publications

(5 citation statements)

References 32 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…One possible reason for the higher restatements in the earlier period is the side effects of the 2008-2009 global economic crisis. Even though the crisis badly hit the US and several developed countries, the Malaysian economy also experienced the financial turmoil (Qasem et al, 2017). Table 4 shows the distribution of types of financial restatements based on a review of the annual reports.…”

Section: Methodsmentioning

confidence: 99%

“…One possible reason for the higher restatements in the earlier period is the side effects of the 2008-2009 global economic crisis. Even though the crisis badly hit the US and several developed countries, the Malaysian economy also experienced the financial turmoil (Qasem et al, 2017). The total return index at the fiscal year end for period t minus total return index at the fiscal year end for period t-1 to total return index at the fiscal year end for period t-1 Politically connected…”

Section: Descriptive Statisticsmentioning

confidence: 99%

“…Malaysia provides a useful setting to examine the research question for several reasons. First, financial restatements are quite pervasive, as evidenced by Qasem et al (2017), who find that more than 20% of Malaysian public listed companies (PLCs) restated their financial statements during the period 2005 to 2014. This issue has attracted the attention of researchers to examine the reasons for and determinants of financial restatements (Abdullah et al, 2010;Abdul Wahab et al, 2014;Hasnan and Hussain, 2015;Wan Mohammad et al, 2018), as well as amendments to quarterly unaudited results (Ku Ismail and Abd Rahman, 2011) in Malaysia.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Financial restatements and sell-side analysts' stock recommendations: evidence from Malaysia

Qasem

Aripin

Wan‐Hussin

2020

IJMF

View full text Add to dashboard Cite

PurposeThe purpose of this paper is to examine the influence of financial restatements on the sell-side analysts' stock recommendations.Design/methodology/approachThe sample of this study is based on a dataset from a panel of 246 Malaysian public listed companies for the period 2008 to 2013 (651 company-year observations). This study employs feasible generalized least squares regression.FindingsThis study finds a negative and significant relationship between restated companies and sell-side analysts' stock recommendations, which means that sell-side analysts issue less favorable stock recommendations for restated companies.Practical implicationsThe findings based on observations from an emerging economy complement the results of the US studies that analysts revise their earnings forecasts or recommendations downwards or drop coverage following financial restatements. The results of this study should be useful to capital market participants in understanding how analysts perceive and evaluate restated companies.Originality/valueThis paper expands the literature on financial restatements consequences in an emerging market which is largely unstudied. Prior research on analyst behavior towards restatements has focused on the consequences of restatements in terms of analyst following and forecast accuracy and dispersion. This study examines if and how the restatements affect the analysts' final output as reflected in the recommendation opinion, an area that has so far received little attention.

show abstract

Section: Methodsmentioning

confidence: 99%

“…One possible reason for the higher restatements in the earlier period is the side effects of the 2008-2009 global economic crisis. Even though the crisis badly hit the US and several developed countries, the Malaysian economy also experienced the financial turmoil (Qasem et al, 2017). The total return index at the fiscal year end for period t minus total return index at the fiscal year end for period t-1 to total return index at the fiscal year end for period t-1 Politically connected…”

Section: Descriptive Statisticsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Financial restatements and sell-side analysts' stock recommendations: evidence from Malaysia

Qasem

Aripin

Wan‐Hussin

2020

IJMF

View full text Add to dashboard Cite

show abstract

“…According to the Companies Act 2016 (Act 777), the preparation of financial statements should follow the accounting standards. However, the Generally Accepted Accounting Principles (GAAP) offer flexibility to companies with several accounting policy options, which then creates the opportunity for them to window-dress their financial statements, and, in turn, increase the incidence of restatement at a later period (Albring et al, 2013;Qasem et al, 2017). According to Schroeder (2001), the Securities and Exchange Commission in the USA mentioned that the most noticeable indicator for inappropriate accounting is through restatement.…”

Section: Introductionmentioning

confidence: 99%

The effect of corporate governance and firm-specific characteristics on the incidence of financial restatement

Hasnan

Razali

Hussain

2020

JFC

View full text Add to dashboard Cite

Purpose This paper aims to examine the effects of corporate governance and firm-specific characteristics on the incidence of financial restatement among Malaysian public listed firms. Design/methodology/approach The elements of corporate governance consist of board size, board independence, multiple directorships, audit committee expertise, external audit quality and executive compensation. Meanwhile, the firm-specific characteristics consist of firm age, firm performance, firm leverage and firm liquidity. The agency theory has been used to guide the study. This study used a matched-pair sample that consisted of a sample of 49 restatement firms and 98 non-restatement firms between the years 2011 and 2016. Univariate (t-test and Pearson correlation) and multivariate (logistic regression) statistical techniques were used to test the hypotheses. Findings The results show that there is a negative and significant relationship between executive compensation and firm performance, and the incidence of financial restatement. In addition, there is a positive and significant relationship between firm leverage and the incidence of financial restatement. However, the other corporate governance and firm-specific characteristic variables included in the study were found to be insignificant with the incidence of financial restatement. This paper provides evidence that some form of corporate governance mechanisms and firm-specific characteristics, particularly executive compensation, firm performance and firm leverage, may influence the direction and magnitude of the incidence of financial restatement. The findings indicate that optimal executive incentives may align management interests with those of shareholders. In addition, greater performance and lower leverage levels minimise firms’ financial pressure and debt covenant violation risk, which may reduce the management tendency to misstate the financial statement, and consequently, minimise the likelihood of financial restatement. Originality/value The main value of this paper is the effect of corporate governance and firm-specific characteristics on the likelihood of financial restatement in Malaysia. The findings of this study provide useful insights for regulators to improve and reconsider the current regulations on corporate governance mechanisms.

show abstract

“…Companies follow financial accounting standards in preparing their financial statements. However, Accounting standards offer some flexibility to choose between several accounting policies, which gives the opportunity for companies, especially, those under considerable level of financial constraints, to window dressing their annual reports, which, in turn, increase the probability of restating their financial statements latterly (Qasem et al, 2017).…”

Section: Introductionmentioning

confidence: 99%