Political connections and income smoothing: Evidence of institutional investors’ monitoring in Malaysia

Tee, Chwee Ming

doi:10.1016/j.mulfin.2020.100626

Cited by 16 publications

(24 citation statements)

References 55 publications

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“…Institutional investors' ownership is measured as the proportion of institutional investors' shareholding (the total shares owned by institutional investors divided by the total shares outstanding) (Ghafoor et al, 2019;Tee, 2020;Zheng, 2010); the shareholding data is extracted from the list of the 30 largest shareholders reported in the company's annual reports. We classify institutional investors according to privately managed institutions or state owned institutions.…”

Section: Institutional Investors' Ownershipmentioning

confidence: 99%

Institutional investor heterogeneity and analyst recommendation: Malaysian evidence

Qasem

Aripin

Wan‐Hussin

et al. 2021

Cogent Business & Management

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This study investigates the association between institutional investors' ownership and sell-side analysts' stock recommendations in the context of the heterogeneous nature of institutional investors. Based on a sample of 281 Malaysian public listed companies over the period 2008-2013 (732 company-year observations), we find a significant positive relationship between institutional ownership, in particular ownership held by privately managed institutional investors and sell-side analysts' stock recommendations, but no significant relationship between state owned institutional investors and sell-side analysts' stock recommendations. This suggests that the relationship between institutional investors and analysts' stock recommendations are different among different types of institutional investor. Our results are robust to tests for potential endogeneity between institutional ownership and analysts' stock recommendations.

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Section: Institutional Investors' Ownershipmentioning

confidence: 99%

Institutional investor heterogeneity and analyst recommendation: Malaysian evidence

Qasem

Aripin

Wan‐Hussin

et al. 2021

Cogent Business & Management

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“…Chaney et al (2011) argued that companies with strong political connections tend to be monitored by government and third parties. Tee (2020), explained further that political connections can be a source of severe agency problems for shareholders. As a result, they are reported to have lower earnings quality and unclear financial reporting…”

Section: Introductionmentioning

confidence: 99%

Drivers of social responsibility disclosure: the moderation of the president director's busyness and political connections

Yudhanti

Tjahjadi

2021

AJAR

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PurposeThis study aims to examine the effect of company size on social responsibility disclosure. In addition, this study examines the president director's busyness and political connections in moderating the association between company size and disclosure of corporate social responsibility.Design/methodology/approachThe data used in this study were secondary data which included 1,165 observations (company-year). The analysis technique used was multiple regression method and the analysis was carried out by employing STATA software.FindingsResearchers found that company size has a positive effect on social responsibility disclosure. The busyness of the president directors and companies connected to politics significantly weakens the association between company size and disclosure of social responsibility.Research limitations/implicationsThis study uses only one measure of the driving force of social responsibility disclosurePractical implicationsThis study contributes to the social responsibility literature by examining the effect of company size on social responsibility. Information on social responsibility disclosure has been carried out by companies in Indonesia; however, it is indicated that only large companies provide sufficient information on social responsibility.Social implicationsStakeholders can find out information on social responsibility carried out by the company.Originality/valueCompanies with busy CEOs and politically connected firms weaken the association between company size and disclosure of social responsibility.

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“…Wu Gaobo and He Fangfang [20] believed that compared to the management of non-CONTs, the management of CONTs has a stronger desire to reduce earnings management. Chwee Ming Tee [13] discovered that politically associated firms prefer smooth income. According to the reputation theory, managers of politically associated firms with a long history are more motivated to smooth income to maintain a positive reputation in capital markets.…”

Section: Nature Of Stock Rights and Income Smoothingmentioning

confidence: 99%

“…Menkhoff and Schmeling [34] found that more information held by institutional investors resulted in lower trading volume in stock markets and the more inclined they are to conduct secret transactions, which is conducive to stock market stability. Chwee Ming Tee [13] pointed out that institutional investors who convey valuable private information can strengthen the relationship between politically connected companies and income smoothing. Therefore, if institutional investors can deliver useful information through personal advantages, the relationship between CONTs and income smoothing will be strengthened.…”

Section: Nature Of Stock Rights Income Smoothing and Institutional Investor's Monitoringmentioning

confidence: 99%

“…Ilhang Shin and Sorah Park [40] divided institutional investors into domestic institutional investors and foreign institutional investors according to geographical origin to examine the monitoring incentives of institutional investors. Chwee Ming Tee [13] divided institutional investors according to their geographical position as domicile institutional investors and foreign institutional investors. Due to domicile institutional investor's geographical location advantages and ease of regulation of firms, domicile institutional investors strengthen the relationship between politically associated firms and income smoothing.…”

Section: Nature Of Stock Rights Income Smoothing and Institutional Investor's Heterogeneitymentioning

confidence: 99%

See 1 more Smart Citation

Institutional Investors' Monitoring Roles in State Controlled Firms and Income Smoothing Analysis for Stable Growth and Sustainability: Focusing on China Stock Market

Xu¹,

Kim²

2021

Preprint

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The purpose of this study is to examine the relationship between the institutional investors which can affect financial performance for corporate sustainability on the income smoothing. Therefore, this study focus on the connection between the nature of stock rights and income smoothing in China. For this study, hypotheses were established on the relationship each state-controlled companies, income smoothing, and information equilibrium of individual investors, and empirical analysis was conducted through related variables. The analysis results are summarized in three categories as follows. First, this research finds that state-controlled firms (CONTs) prefer income smoothing activities compared to non-state-controlled firms for the long-term sustainable development of firms using data from 2011 to 2019. Second, this study found out that Institutional investors support the behavior of CONTs to smooth their earnings because this behavior is seen as an attempt by CONTs to convey valuable private information to other investors. Third, we was able to discover that institutional investors' monitoring effect is predominantly driven by pressure-resistant institutional investors. This research complements the lack of empirical research on income smoothing and enable to give a guideline that the type of stock rights is a critical key determinant of participation in income smoothing activities for stable growth and sustainability in the future.

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Political connections and income smoothing: Evidence of institutional investors’ monitoring in Malaysia

Cited by 16 publications

References 55 publications

Institutional investor heterogeneity and analyst recommendation: Malaysian evidence

Institutional investor heterogeneity and analyst recommendation: Malaysian evidence

Drivers of social responsibility disclosure: the moderation of the president director's busyness and political connections

Institutional Investors' Monitoring Roles in State Controlled Firms and Income Smoothing Analysis for Stable Growth and Sustainability: Focusing on China Stock Market

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