Chief Executive Officer/ Managing Director Succession and Value Relevance of Accounting Numbers

Ahmad, Sharifah Zarina Syed; Hassan, Mohamat Sabri; Jaffar, Romlah

doi:10.17576/ajag-2016-07-03

Cited by 4 publications

(2 citation statements)

References 71 publications

(158 reference statements)

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“…The number of outstanding shares was used to deflate all the variables (except control variables) in order to reduce the heteroscedasticity problem (Kanagaretnam et al, 2009;Veltri & Ferraro, 2018). As for value relevance studies, firm size and leverage were incorporated as controlled variables as they were commonly used in past studies (Acaranupong, 2017;Ahmad, Hassan, & Jaffar, 2016).…”

Section: Price Modelmentioning

confidence: 99%

Decision Usefulness of Net Income versus Comprehensive Income: Case of Financial Firms in Malaysia

Yew¹,

Latiff²,

San³

2020

AJBA

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Manuscript type: Research paper Research aims: This paper aims to examine the decision usefulness of net income (NI) which includes predictive power and value relevance by comparing it with comprehensive income (CI), for financial firms in Malaysia. Design/Methodology/Approach: This study uses panel data analysis techniques which focus on unbalanced panel dataset of 2012 to 2017, obtained from 29 financial firms listed in Malaysia. Research findings: Results show that in the case of predictive power tests, there is insufficient evidence to conclude that one accounting metric has better predictive power than the other. In the case of value relevance, results show that NI is better than CI when using the price and return models. This indicates that NI is more decision useful to investors than CI for financial firms in Malaysia. Theoretical contribution/Originality: This study expands on the literature of decision usefulness of NI (in comparison to CI) for financial firms within an emerging economy, such as Malaysia, which has a smaller and less efficient market. The findings support the agency theory, particularly the Type II agency problem, which show that there is a conflict between controlling and non-controlling

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Section: Price Modelmentioning

confidence: 99%

Decision Usefulness of Net Income versus Comprehensive Income: Case of Financial Firms in Malaysia

Yew¹,

Latiff²,

San³

2020

AJBA

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show abstract

“…(2) a semi-strong form of efficiency where share prices reflect all publicly available information and (3) a strong form of efficiency where share prices reflect all information, both publicly available and private information, known to anyone at a point in time. Unlike developed countries that generally have a strong form of market efficiency, the equity market of Malaysia is classified as having semi-strong efficiency (Syed Ahmad et al 2016;Tan et al 2014;Hussin et al 2010) because the share prices of companies listed in Bursa Malaysia react quickly to all publicly available information in annual reports (Tan et al 2014).…”

Section: Literature Review and Hypothesis Development Hcd Informationmentioning

confidence: 99%

Non-Financial Human Capital Disclosure and Share Price

Hassan

Mustafa²,

Rahman

2019

AJAG

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The aim of this study is to examine the relationship between disclosure of non-financial human capital information (HCD) and share price of the top 100 companies listed on Bursa Malaysia from financial years 2010 to 2013. Human capital (HC) is considered a valuable asset in a knowledge-based economy. The knowledge and skills possessed by individuals are regarded as a key source of competitive advantage and value creator to companies. Prior research acknowledges the importance of HC information to investors, who may have to rely on disclosures in annual reports when evaluating a company's future direction, potential, value and prospects. However, companies only disclose limited information on this 'asset'. In this study, HCD is viewed from the perspective of signalling and efficient capital market theories. Following previous studies, we incorporate HC information and its two components, namely, HC information related to directors and employees, into the Ohlson model. Our study reveals an increasing trend of HCD, and the disclosure is value relevant. Further analysis of the HC information component reveals that both HC information (HC related to directors and employees) are value relevant. These findings are in line with the argument that Malaysian financial analysts and fund managers regard information related to the company's management and key corporate decision makers as important in investment decision making. The findings of this study are relevant to accounting standard setters in determining the types of HC that should be disclosed in the annual reports because this information can create value for companies. Managers should also pay attention to HC information because such information is value relevant to stakeholders.

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Value of CEO Succession Policy on CEO Transition

Sivapregasam

Selamat

Rahim

et al. 2019

AJAG

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Chief Executive Officer (CEO) transition is a continuous process of change in leadership involving removal of existing CEO and replacement of new CEO. Ideally, CEO transition occurs based upon the CEO Succession Policy developed by the Board of Directors. The CEO succession plan and policy is important because it reduces the impact of a CEO's sudden removal on the firm. In recent time, there is an immense increase in CEO transition recorded among emerging economy, nonetheless, the issue has not been well addressed in the literature. Disclosure policy in Malaysia also views change of CEO as an important element that will have an impact on the firm value. To evaluate the CEO succession policy, this study investigates the effect of CEO transition announcement on the share price. This study adopts the event study method and employs two estimation models for expected return, which are Market Model (MM) and Capital Asset Pricing Model (CAPM). This study examines the simultaneous announcement, which indicates the adoption of succession policy, as well as the announcement of CEO appointment and CEO turnover. A total of 354 announcements of CEO transition from 170 firms listed on Bursa Malaysia, over the duration of ten years from 2007-2016 is observed. The result indicates that the firm's share price generally reacts towards all types of CEO transition announcement, with a stronger reaction significantly observed through the simultaneous announcement. Further robustness check with regression analysis confirms that when the CEO transition announcement is simultaneous, it creates more value to the firm. In other words, the CEO succession policy, where proper CEO transition takes place, eliminates the uncertainty and risk, hence, giving a positive impact on firm value. This finding also contributes to the signalling theory literature, where anticipated event induces a positive reaction from investors, as reflected in the firm share price.

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Chief Executive Officer/ Managing Director Succession and Value Relevance of Accounting Numbers

Abstract: Apart from Board of Director, top management, including Chief Executive Officer or Managing Director is alsoconsidered as an important governance mechanism of the firm. CEO

Cited by 4 publications

References 71 publications

Decision Usefulness of Net Income versus Comprehensive Income: Case of Financial Firms in Malaysia

Decision Usefulness of Net Income versus Comprehensive Income: Case of Financial Firms in Malaysia

Non-Financial Human Capital Disclosure and Share Price

Value of CEO Succession Policy on CEO Transition

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