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

Abstract

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