Earnings Management Behavior in Malaysia: The Role of Ownership Structure and External Auditing

Abstract

"This paper aims to empirically investigate firms’ earnings management (EM) behaviour, representing an issue in the realm of corporate financial reporting. Specifically, it explores the strategic roles of two common governance elements of ownership (managerial, institutional and family) and external audit in shaping the firms’ EM behaviour based on the two common EM attributes of Discretionary Accruals (DA) and Real Activities EM (REM). The analyses based on 227 survived Malaysian listed firms throughout the sixteen-year period from 2001 to 2016 (3,632 firm-year observations) indicate a dynamic EM behaviour depending on the presence of different ownership structures. Whilst a high percentage of family and institutional ownership mitigates DA, it however does not hold true for REM. Further, this paper also shows that the external control mechanism of audit quality is not significant in mitigating both EM attributes. The empirical results suggest that firms facing different challenges would affect the firms’ financial reporting behaviours in their choice of EM. The paper adds to the growing body of empirical knowledge dealing with the determinants of DA and REM from the lens of an emerging economy like Malaysia. KEYWORDS: Earnings management, discretionary accruals, real earnings management, accrual earnings management, financial reporting quality."

A Review Analysis of Earnings Management Report Disclosure

“…The studies of 227 Malaysian listed companies that survived from 2001 to 2016 (3,632 firm-year data) show that earnings management behaviour is dynamic and dependent on the presence of various ownership arrangements. While a large proportion of family and institutional ownership helps to reduce discretionary accruals, this is not the case for real earnings management (Nor et al, 2020).…”

Ceo Facial Masculinity, Characteristics and Earnings Management

“…Financial reporting's major purpose is to convey information to stakeholders about a company's financial performance and economic conditions, so that they can make informed decisions based on this information (Mahyuddin et al, 2020). Accordingly, the quality of financial reporting has been considered as a vital requirement by stakeholders that play a key role in eliminating information asymmetry and positively influence the decisions of investors (Almaqtari et al, 2021).…”

Faktor-Faktor Yang Mempengaruhi Manajemen Laba Perusahaan Manufaktur

“…Menurut penelitian Kurniati & Syafruddin (2019); Waweru & Prot (2018) menyatakan bahwa ada pengaruh negatif antara kualitas audit dengan manajemen laba. Mahyuddin et al, (2020) ada pengaruh positif antara kualitas audit dengan manajemen laba. Alexander (2021) kualitas audit tidak berpengaruh terhadap manajemen laba.…”