Corporate governance and earnings conservatism in Malaysia

Shafie

2021

PAR

Purpose This paper aims to examine whether conditional conservatism is affected by chief financial officer (CFO) attributes as this issue is understudied in Malaysia. Given that CFOs have a direct responsibility for financial reporting, therefore, their individual attributes are important in influencing conservatism in financial reporting. Design/methodology/approach This study uses non-financial listed firms in the Main Market of Bursa Malaysia from the years 2016 until 2019. Findings The results show that CFOs’ attributes, namely, gender, age, education level and ethnicity, affect earnings conservatism. To test for robustness, the authors use difference-in-difference, propensity score-matching and unconditional conservatism, namely, market-to-book ratio and the authors find the results hold with an exception for age and education level. Further, the effect of these attributes is more profound in non-Big4 audited firms, suggesting that CFO attributes act as a substitute mechanism for lower audit quality. Originality/value This study complements existing studies by documenting the first evidence on the significant effects of CFOs’ attributes in influencing accounting conservatism in an emerging country, namely, Malaysia. This is the first paper, to the humble knowledge, that examines CFOs’ attributes on accounting conservatism in Malaysia.

Section: Introductionmentioning

confidence: 99%

CFO attributes and accounting conservatism: evidence from Malaysia

Shafie

2021

PAR

“…More specifically, (Abernathy, 2010) find that adding accounting financial expertise to the audit committee is associated with an increase in the level of conservatism. In different contexts, (Hamdan et al, 2012;Marzuki et al, 2016;Sultana, 2015) find a positive association between audit committee financial experts and conservatism practices in Jordan, Malaysia, and Australia, respectively.…”

Section: The Association Between Audit Committee Characteristics and Accounting Conservatismmentioning

confidence: 99%

“…Second, Prior literature endorses the importance of having financial expertise amongst audit committee members by providing evidences that it increases their monitoring effectiveness (Carcello et al, 2011;Marzuki, Wahab, and Haron, 2016;Badolato et al, 2014;Aanu et al, 2014), reduces the accounting restatements (Carcello et al, 2011), associates with higher analyst forecast accuracy and lower dispersion (Abernathy, Herrmann, Kang, and Krishnan, 2013) and reduces earnings management (Badolato et al, 2014). More specifically, (Abernathy, 2010) find that adding accounting financial expertise to the audit committee is associated with an increase in the level of conservatism.…”

Section: The Association Between Audit Committee Characteristics and Accounting Conservatismmentioning

confidence: 99%

Audit Committee Characteristics and Accounting Conservatism: Does the Power of People Matter?

Mahdy¹

2020

Preprint

Consistent with the prediction that political instability is strongly reflected in the performance of the economy, we examine whether the 2011 Egyptian Revolution mediates the association between audit committee characteristics and accounting conservatism. More specifically, we examine the association between five audit committee characteristics: independence, financial expertise, size, diligence, and members' multiple directorships and the levels and changes of accounting conservatism post the 2011 Egyptian Revolution. Using 205 firm-year observations between 2009 and 2013, we find evidence that audit committee independence, financial expertise, diligence, and members' multiple directorships (size) are positively (negatively) associated with accounting conservatism after the Egyptian Revolution. This result suggests a shift in the role played by audit committee members post the Egyptian Revolution. It lends support to the Developmental Democracy Theory, which emphasizes the power of people as responsible community citizens. The results in this study are robust to the use of alternative model specifications (e.g., an index for audit committee effectiveness, two stages regression, and a Propensity-Score Matching Sample).

The Indonesian Journal of Accounting Research

“…Research that examines board expertise and accounting conservatism is scarce. Previous research has mainly examined the relationship between audit committee expertise and conservatism (Hamdan, 2020;Kao & Chu, 2016;Marzuki et al, 2016;Sultana, 2015). Therefore, this study examines the influence of BoD characteristics on accounting conservatism.…”

Section: Introductionmentioning

confidence: 99%

Board of Director Characteristics, Institutional Ownership, and Accounting Conservatism

Rustiarini

Gama

Werastuti

2021

One of the determinants of conservatism is Board of Directors (BoD) characteristics. Several studies have examined the relationship between board characteristics and accounting conservatism. Nonetheless, previous empirical findings show heterogeneous and inconclusive results. This study aims to prove the role of board characteristics, namely board female, board expertise, board overconfidence, and board size in accounting conservatism. This study also examines institutional ownership as moderating variable. This research was conducted on 118 manufacturing companies for three periods, namely 2017-2019. The data analysis technique used is Partial Least Square. The test results prove that board female and board expertise increase accounting conservatism, while board overconfidence reduces conservatism. However, there is no relationship between board size and accounting conservatism. This study also indicates that institutional ownership strengthens the relationship between board females and board expertise to accounting conservatism. Contrary, institutional ownership fails as moderating variable between board size and accounting conservatism relationship. In testing the board overconfidence variable, the percentage of institutional ownership variable cannot be a moderating variable. Nevertheless, the interaction between board overconfidence and the number of institutional investors has a negative effect on accounting conservatism.