Financial reporting failures, board's competency and effectiveness

Abstract

Aiman Nariman Mohd-Sulaimanis a Professor of Law at the Law Faculty, International Islamic University, Malaysia. Her wider research interests are on corporate law and corporate governance with particular focus on regulatory techniques and enforcement. While she is maintaining an ongoing interest in traditional corporate law issues, particularly directors ' duties and shareholders ' empowerment, her current research focus is on enforcement strategies, the interaction between self-regulation and legal rules, as well as the Islamic perspective on those issues.ABSTRACT Financial misreporting and accounting misstatements fi gure prominently in recent corporate scandals. Although the more notorious of these involved directors ' fraud and confl ict of interests, there are cases that are indicative of a board that has failed to exercise its oversight duty where directors were negligent, resulting in loss or damages to the company. This article highlights the following governance issues: the relevance of fi nancial literacy or expertise and its enforceability and process, and procedures that could improve board ' s effectiveness. As the cases involving fi nancial reporting failures publicly unfold in courtrooms and in the media, boards and regulators need to rethink and reconsider the suitability of current board practices and regulatory response to governance breakdowns. This article places the discussion within the context of several case studies that deal with specifi c instances of fi nancial reporting failure and are of interest because of the involvement of and liability risks for non-executive directors. This article is also interesting from a comparative law perspective in view of increasing the number of companies undertaking cross-listing or dual listing of shares. A more consistent approach among the regulators is needed to prevent regulatory arbitrage.

Financial Instruments Disclosure Practices: Evidence from Malaysian Listed Firms

“…BOARD EXPERTISE (BEXP) Prior literature recommends that board size affects board effectiveness in the sense of a larger board being more likely to have more knowledge and skills (Ismail and Rahman 2011;Elzahar and Hussainey 2012), but without an appropriate level of expertise among the board members, it will be a cost instead of a benefit to the firm. Further, Sulaiman (2013) suggests that the lack of relevant expertise among the board member could lead to a failure of a board to exercise its oversight duty, resulting in loss or damages to the company. Specifically, Sulaiman (2013) highlights the relevance of financial literacy or expertise among the board as it could improve board's effectiveness.…”

“…Further, Sulaiman (2013) suggests that the lack of relevant expertise among the board member could lead to a failure of a board to exercise its oversight duty, resulting in loss or damages to the company. Specifically, Sulaiman (2013) highlights the relevance of financial literacy or expertise among the board as it could improve board's effectiveness. There is still a limited number of studies (Sulaiman 2013) that focus on board expertise, hence, this study extends the literature by including board expertise as the board has a role in ensuring corporate disclosure policies are in place.…”

“…Specifically, Sulaiman (2013) highlights the relevance of financial literacy or expertise among the board as it could improve board's effectiveness. There is still a limited number of studies (Sulaiman 2013) that focus on board expertise, hence, this study extends the literature by including board expertise as the board has a role in ensuring corporate disclosure policies are in place. Consistently, the study predicts that firms with greater number of board members with accounting or finance expertise would enable them to better understand the financial reporting elements associated with better compliance with financial reporting standards.…”

Model to Predict Survival of Transportation and Shipping Companies

“…Traditional statistical methods were for many years widely used for development of one-dimensional discriminant analyses [1], [2], [3] and they made it possible to divide companies into the so-called failing and prospering. A much more widespread statistical method is a multi-dimensional discriminant analysis followed by a logit analysis [4].…”

“…A much more widespread statistical method is a multi-dimensional discriminant analysis followed by a logit analysis [4]. Numerous classical statistical methods were developed for bankruptcy prediction and they were described particularly by the following authors: Mohd-Sulaiman [1], Garcia-Gallego & Mures-Quintana [5], Teng & Bhatia & Anwar [6], Sun & Huang & He [7], Waszkowski [8], Yazdanfar [9], De Andrés &Landajo& Lorca [10], Lin &Yeh& Lee [11] and Wu & Hsu [4]. The methods can be briefly characterized as follows:…”