Do political connections affect the role of independent audit committees and CEO Duality? Some evidence from Malaysian audit pricing

Bliss, Mark Anthony Gerard; Gul, Ferdinand A.; Majid, Abdul

doi:10.1016/j.jcae.2011.10.002

Cited by 69 publications

(59 citation statements)

References 57 publications

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“…Chang and Sun (2009) argue that the market seems to perceive CEO duality as impeding the monitoring of accounting quality, which lowers the stock price informativeness of earnings. Bliss et al (2011) find that audit fees are deemed higher in firms where CEOs are also the chair of the boards due to their potentially important audit risk.…”

Section: Control-ownership Wedge Separation Of Ceo and Chair Posimentioning

confidence: 89%

Control–ownership wedge, board of directors, and the value of excess cash

Belkhir

Boubaker²,

Derouiche³

2014

Economic Modelling

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This study investigates the effects of the separation of control and ownership on the value of cash holdings in publicly listed French firms. It also sheds light on the role of board independence in such a relation. Theory suggests that investors are more likely to discount the value of excess cash held by firms with low corporate governance. Using the valuation regression of Fama and French (1998), empirical results show that the value of excess cash holdings decreases dramatically with the separation of control and cash-flow rights of the controlling shareholder. This value discount is, however, less pronounced in firms with more independent boards (i.e., boards with more independent directors and separate chief executive officer and chair positions). Our empirical findings support the argument that excess cash contributes less to firm value when minority shareholders are more likely to be expropriated by controlling shareholders. Independent boards seem to be effective in mitigating investors' concerns about the use of excess cash. Overall, the results provide compelling evidence that cash valuation is largely influenced by corporate governance quality in a concentrated ownership setting.

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Section: Control-ownership Wedge Separation Of Ceo and Chair Posimentioning

confidence: 89%

Control–ownership wedge, board of directors, and the value of excess cash

Belkhir

Boubaker²,

Derouiche³

2014

Economic Modelling

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“…Becker et al (1998), Frankel et al (2002, Gul et al (2003), and Lin and Hwang (2010), for example, argue that high quality auditors are expected to be more likely to detect the practices of earnings management. In other words, Bartov et al (2001), Lai (2009), Gul et al (2009Gul et al ( , 2010, and Bliss et al (2011) suggest that higher quality auditors prefer to report errors and irregularities and are unwilling to accept questionable accounting practices. In line with those arguments used in previous studies, in this study, in the circumstance where companies with SFCF may face agency cost of free cash flow, we also argue that high quality auditors will be more likely to detect the practices of earnings managment.…”

Section: B Auditor Qualitymentioning

confidence: 99%

The impact of surplus free cash flow and audit quality on earnings management

Rusmin

Astami

Hartadi

2014

Asian Review of Accounting

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is twofold. First, it investigates whether high free-cash-flow companies with low-growth opportunities (surplus free cash flow (SFCF)) are associated with income-increasing earnings management. Second, it scrutinizes the effect of audit quality on the income-increasing earnings management and SFCF and earnings management relationship. Design/methodology/approach -This study focusses on companies listed on the Bursa Efek Indonesia, Bursa Malaysia, and Stock Exchange of Singapore over the period 2005-2010. The cross-sectional modified Jones (1991) model is used to measure discretionary accruals (DACs) (the proxy for earnings management). SFCF is an indicator variable with firm j scored 1 if their retained cash flows is above the sample median and their price to book ratio is below the sample median in fiscal year t; otherwise is scored 0. Audit quality refers to the quality of the auditor. Indicator variable with firm j scored one (1) if their auditor in fiscal year t is a Big 4 audit firm; otherwise scored zero (0). Findings -The empirical result provides supports for the hypothesis suggesting that company managers with high free cash flow and low-growth opportunities tend to use their discretion to select income increasing accounting choices. Investigation based on each of the three-country sub samples indicates that the relationship between SFCF and managers' income-increasing accounting choice is applicable in Malaysia, partially applicable in Singapore but it is not valid in Indonesia. In addition, the statistical analyses based on all sample and country sub-samples indicate that audit quality has negative relationships with earnings management measure. The result of univariate analysis suggests that mean of DACs in companies audited by Big 4 auditors are significantly smaller compared to that of in non-Big 4 audited firms. However, the results of multivariate analysis suggest that audit quality has only partially significant association with earnings management. Moreover, this study finds that Big 4 auditors insignificantly moderate the SFCF-earnings management relationships. Practical implications -This research may have implications for ...

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“…Separation of the chairman and CEO position promotes accountability and facilitates the division of responsibilities between them thus no individual can influence board's discussions and decision-making (Securities Commission Malaysia, 2017). The board is said to be independent if the CEO and chairman positions are held by different individuals in one period (Bliss, Gul & Majid, 2011).…”

Section: Ceo Dualitymentioning

confidence: 99%

Corporate Governance Mechanisms And Accretive Share Buyback In Malaysian Public Listed Companies

Kamalluarifin¹

2018

The European Proceedings of Social and Behavioural Sciences

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Accretive share buyback is defined as an earnings management activity which is conducted to show an earnings surprise. It provides information for analysts and help in the decision making. The purpose of this study is to investigate the relationship between corporate governance mechanisms towards accretive share buyback among Malaysian public listed companies. The independent variables of this are corporate governance mechanisms which are, board size, CEO duality, multiple directorships and board independence while an accretive share buyback is the dependent variable. The sample consists of 100 companies listed in the Bursa Malaysia main market that announced their share buyback for the year 2016.Information on independent and dependent variables was obtained from the 2016 annual reports. Dependent variable used Hribar's model from Chandren, Zamri and Ruhani (2015) in order to measure accretive share buyback where the actual earnings per share (EPS) after share buyback (REPS) is expected to be more than a minimum of 1 cent against the pre-buyback EPS (PEPS). The result reveals that board size and board independence have a significant relationship with accretive share buyback while CEO duality and multiple directorships has no significant relationship with accretive share buyback. Therefore, the hypotheses for CEO duality and board independence towards accretive share buyback are not supported.

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Do political connections affect the role of independent audit committees and CEO Duality? Some evidence from Malaysian audit pricing

Cited by 69 publications

References 57 publications

Control–ownership wedge, board of directors, and the value of excess cash

Control–ownership wedge, board of directors, and the value of excess cash

The impact of surplus free cash flow and audit quality on earnings management

Corporate Governance Mechanisms And Accretive Share Buyback In Malaysian Public Listed Companies

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