Linking the Ethics and Management Control Literatures

Merchant, Kenneth A.; White, Lourdes Ferreira

doi:10.1108/s1474-787120170000028001

Cited by 20 publications

(21 citation statements)

References 71 publications

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“…For instance, ethics-related concepts, such as corporate integrity, anti-corruption, compliance, and transparency, have regularly been emphasized in codes of corporate governance. By integrating ethical practices, for example, code of ethics, ethics training, and whistle-blowing policy into the company's governance, it provides effective tools for monitoring control (Merchant & White, 2017).…”

Section: Ethical Commitmentmentioning

confidence: 99%

Ethical Practice Disclosure of Malaysian Public Listed Companies

Abidin

Hashim

Salleh

et al. 2019

KSS

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The Malaysian corporate environment has been shocked by corporate scandals and poor performance among government-related companies, such as 1Malaysia Development Berhad (1MDB), Lembaga Tabung Haji (LTH), Felda Global Ventures (FGV) and Khazanah Nasional Berhad (KHAZANAH). Despite having strong corporate governance and being strengthened through Malaysia Code of Corporate Governance (MCCG), unethical practices and a lack of transparency remain a problem among Malaysian companies. The purpose of this paper is to examine the level of disclosure of ethical practices among Malaysian public listed companies. Ethical practice disclosure is measured using the modified Ethical Commitment Index (ECI) with six themes derived from the literature; notably, corporate ethical values, action to promote ethics, whistle-blowing policy, code of ethics, sustainability practices, and ethics committee. Through content analysis of the annual reports of 1,115 companies and five years’ observation (2012-2016), this study found there is a need to improve several aspects of ethical practice disclosure. The findings implied that companies supported the MCCG, with most of the companies complying with the recommendations of MCCG 2012 to uphold a high standard of ethical practice. However, supplementary practices, such as disciplinary action, programmes to support a code of ethics, whistle-blowers’ protection, and establishing an ethics committee, are still weak. The findings indicate that the level of ethical practice disclosure among Malaysian public listed companies remains low and raises concern that requires action by regulators. This paper contributes by providing insights into the disclosure of ethical practice among Malaysian public companies.

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Section: Ethical Commitmentmentioning

confidence: 99%

Ethical Practice Disclosure of Malaysian Public Listed Companies

Abidin

Hashim

Salleh

et al. 2019

KSS

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“…Palmer (2012) stated that the creation of a social structure and social control by strong organizational agents would not only cause individuals to commit unethical actions, but furthermore it would lead to the institutionalization of violations (mutual fraud). Merchant and White (2017) found that managers who were under strong personal pressure would be willing to take any action to avoid the termination of their employment or to obtain compensation and promotion. Research by Davis, et al (2006) found that almost half of the participants in their research experiment created budgetary slack when they were under pressure from their superiors, even though they knew that what they did was unethical and detrimental to the company.…”

Section: Obedience Pressure Vs Peer Pressure On Budgetary Slackmentioning

confidence: 99%

“…The social influence theory shows that social pressure causes changes in an individual's decision-making preferences. Merchant and White (2017) found that managers who are under strong personal pressure were willing to take any action to avoid the termination of their employment or to get compensation and a promotion. Lord and DeZoort (2001) also concluded that social pressures can lead to compliance; the desire of individuals to avoid the negative consequences of any disloyal interaction with someone who is in a position of higher authority, or of acting against the wishes of the group.…”

Section: Interaction Between Social Pressure and Religiosity On Budgetary Slackmentioning

confidence: 99%

“…This may be due to the fact that individuals, who are under strong personal pressure, are willing to take any action to avoid the termination of their employment or to obtain some compensation or a promotion (Merchant and White, 2017). The amount of pressure applied to an individual results in the individual ignoring the process of ethical judgment based on the personal values he/she holds.…”

Section: Mirza Br and Khoirunisamentioning

confidence: 99%

“…The results of this study did not succeed in getting statistical support for the interaction between social pressure and religiosity toward budgetary slack. This may be because individuals who are under strong personal pressure may be willing to take any action to avoid the termination of their employment or to obtain compensation or a promotion (Merchant and White, 2017). Therefore, there is no statistically significant difference.…”

Section: Conclusion and Suggestionmentioning

confidence: 99%

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Obedience Pressure vs. Peer Pressure: An Explanation of Muslims’ Religious Role in Budgetary Slack

Br¹,

Khoirunisa²

2021

JIEB

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Introduction/Main Objectives: The performance of individuals in organizations is generally evaluated based on their success at achieving targets. Furthermore, the role of the budget has a major effect on individual behavior in the preparation of the budget, by allowing unethical actions (budgetary slack). Background Problems: There are a few studies that measure the difference in the influence of social pressure between superiors and peers on individual’s behavior in the organizational budgeting process. On the other hand, there are inconsistencies in the results of the research into the role of religiosity in the creation of budgetary slack. Novelty: To explain why people are not influenced by social pressures to create budgetary slack, we use the Psychological Reactance Theory. We argue that religiosity is one factor that influences people in making decisions about participative budgeting. Religiosity is believed to be able to influence one's personal values, so it impacts on one's judgment and determination of whether a thing is good or bad. Research Methods: This study uses an experimental research method on 65 undergraduate accounting students and a 2x2 factorial design consisting of two factors, social pressure (obedience pressure and peer pressure) and religiosity (high and low). Finding/Results: The results show that religiosity is proven to play an important role in the budget decision-making process, futhermore it minimizes the occurrence of budgetary slack. Conclusion: Individuals who have high religiosity are proven to be better able to avoid creating budgetary slack compared to individuals who have low religiosity, when receiving pressure from superiors and peers. This result has implications for organizational stakeholders dealing with employee recruitment or in the organization's management control system, as religiosity is an important factor that must be prioritized.

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Ethical commitment, institutional investors and financial performance: Malaysian evidence

et al. 2022

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This study investigates whether institutional investors moderate the relationship between ethical commitment and financial performance amongst Malaysian companies. Through the role of institutional investors, the external monitoring mechanism is expected to reduce the cost associated with the agency problem amongst Malaysian companies, as shown by the lack of ethical practises. Using data from 429 publicly listed companies on the Main Board of Bursa Malaysia from 2012 to 2021, the results show that companies with higher ETHICS have better financial performance than companies with lower ETHICS. However, the findings on the moderating effect of institutional investors cannot be proven. By separating the sample based on pre‐MCCG 2017, institutional investors were found to have an association between ETHICS and performance, but no evidence was found during the period post‐MCCG 2017. This study adds to the perspective of agency theory in the academic literature, of which companies can create values by being committed to higher ethical practises. Results on the moderating effect of institutional investors provide perspective on external monitoring mechanisms in the Malaysian market because they are found to have a monitoring role in enhancing corporate performance. However, such a role decreases after the introduction of MCCG 2017. This study provides insights for Malaysian regulators on the necessity to keep promoting ethical practises and transparency amongst companies to achieve the goals of the National Anti‐Corruption Plan 2019–2023. The ethical practises, however, are not limited to listed companies, and regulators should also consider monitoring the institutions within the capital market.

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Linking the Ethics and Management Control Literatures

Cited by 20 publications

References 71 publications

Ethical Practice Disclosure of Malaysian Public Listed Companies

Ethical Practice Disclosure of Malaysian Public Listed Companies

Obedience Pressure vs. Peer Pressure: An Explanation of Muslims’ Religious Role in Budgetary Slack

Ethical commitment, institutional investors and financial performance: Malaysian evidence

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