Material accounting misstatements: Do managerial overconfidence, financial distress, and corporate governance practices matter?

Abstract

This study examined factors related to the occurrence of material accounting misstatements in Malaysian public listed companies (PLCs). Two factors, motivation and opportunity, were assessed in this study. According to Jensen (1993), as the consequences of material accounting misstatement can be extremely detrimental to the firms and their employees, the occurrence of such affairs must be driven by strong motivation and a great opportunity. The motivation factors consist of managerial overconfidence and financial distress, while the opportunity factors include internal and external corporate governance practices. A total of 103 misstatement and 103 non-misstatement firms, gathered from 2010 to 2018, were examined. Univariate and binary logistic regression analyses were deployed to test the hypotheses. Evidently, highly financial distress, a higher proportion of board independence, the practice of CEO duality, and a larger size of borrowings exerted a significantly positive relationship with material accounting misstatements. Interestingly, a higher proportion of independent board members encouraged the likelihood of material accounting misstatements instead of mitigating such mishaps. This study provides insights to regulators on the efficacy of corporate governance practices in curbing material accounting misstatements. The study addresses the element of managerial overconfidence, which was previously limited to studies on capital structure and leverage decisions.

Corporate Governance and its Impact on the Efficiency of Internal Control on Non-Profit Government Institutions: an Exploratory Study

“…which triggered the administrative and financial corruption and mismanagement and to its role in emphasizing the commitment to policies and control procedures and address many of the ethical problems and an Exploratory Study management that caused the bankruptcy of many institutions around the world and to weakness in Its performance at various levels (Strouhal et al, 2021), and on top of the problems that it seeks to address, is the problem of conflict of interest, which is an ethical problem before it is an administrative problem (Flayyih and Khiari 2022). Therefore, many of the regulations and systems of CG, whether in the public or private sectors aimed at profit or not for profit, included in their principles and rules, mandatory and non-mandatory A set of ethical principles and rules of conduct that must be adhered to by members of senior management in various institutions, and thus provide the appropriate environment for the work of the ICS to work together in the fight against administrative and financial corruption and thus achieve the objectives of the institutions (Nor Azhari et al, 2022).…”