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This study examines the relationship between political connections, corporate governance, and tax aggressiveness among firms listed on the Main Board of Bursa Malaysia. Corporate governance is proxied by firm-level internal and external governance, whereas tax aggressiveness is identified by using the effective tax rates of firms. Data collected from 2000 to 2009 resulted in 2,538 firm-year observations. We find that politically connected firms are more tax aggressive than non-connected firms. Further, we find that a large board size decreases the likelihood of tax aggressiveness, and that an inverse U relationship exists between institutional ownership and tax aggressiveness, which suggests an increase in monitoring as the ownership increases. However, we find no evidence to suggest that corporate governance mitigates the influence of political connections in promoting taxaggressiveness behaviour. Our findings suggest that the impact of political connections could neutralise the benefits of changes in corporate governance in Malaysia.

We examine the association between institutional ownership, political connections, and analyst following in Malaysia from 1999 to 2009. Based on 940 firm-year observations, we document a positive relation between institutional ownership, particularly by Employees Provident Fund (EPF), and analyst following, thus supporting the governance role that institutional investors play in promoting corporate transparency. However, there is no evidence that political connections matter to analyst following. The monitoring role of institutional investors, including EPF, does not appear to be any different between politically connected and nonconnected firms.

Purpose -The purpose of this paper is to examine the relationship between political connection, corporate governance and audit fees in Malaysia. Specifically, it is argued that politically connected firms are perceived to be riskier and thus require auditors to undertake greater audit efforts which in turn lead to higher audit fee. Furthermore, it is also hypothesised that the demand for better corporate governance practices requires more audit effort exert from the auditors, and the demand for higher quality work is expected to be stronger for politically connected firms as these firms are being perceived to have higher risks. This is turn results in higher fees paid to the external auditor. Design/methodology/approach -This paper employs panel regression analysis. The panel data set consists of 382 non-financial firms (1,022 observations) for three years from year 2001 to 2003. Findings -Based on 1,022 firm-year observations for the period of 2001 to 2003, the results reveal that politically connected firms pay higher audit fees, while firms with better governance demand a higher audit quality, leading to higher audit fees. However, there is no evidence to support that corporate governance demands for a higher quality audit especially for politically connected firms. Originality/value -This paper contributes to the corporate governance-audit fees literature by examining a large number of corporate governance variables based on the Malaysian Code on Corporate Governance. In particular, instead of using several individual governance variables such as audit committee, board structure or composition, this study condensed the large number of corporate governance variables into a single index. Furthermore, this study was conducted in Malaysia, which is a unique environment that offers clear identifiable segments based along ethnic line, whereby, politically favoured firms are generally given special privileges by the government.

for constructive comments during JCAE Research Seminar held at Monash KL 2012 for a different version of paper. Effiezal would like to thank David Hay, Steven Cahan, John Byong-Tek Lee and seminar participants at University of Auckland. Effiezal would to like to extend his gratitude to Asheq Rahman for some useful insight. We would like to extend our gratitude to Wan Nordin Wan Hussin and the seminar participants at JCAE 2014 for some comments. Research assistance from Marziana Madah Marzuki and Intan Liyana Mirza are highly appreciated.