The Impact of Asian Financial Crisis to Earnings Management and Operating Performance in Malaysia

Masruki, Rosnia; Azlinna, Azizan Noor

doi:10.3923/sscience.2012.510.516

Cited by 12 publications

(12 citation statements)

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“…Just like other literature (Da Silva et al, 2014) on the financial crisis period, Saleh and Ahmed (2005) also found that EM was significantly more negative during the crisis period. The second study was by Masruki and Azizan (2012), who studied 30 listed companies on the Main Board of Bursa Malaysia for the period 1999 until 2002. They used cash from operations to group their sample into 10 portfolios.…”

Section: Literature Reviewmentioning

confidence: 99%

Earnings Management in Malaysian Companies during the Global Financial Crisis and the Coincidental Effect of IFRS Adoption

Ayedh¹,

Fatima²,

Mohammad³

2019

AABFJ

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This research examines earnings management (EM) behavior during the 2008 financial crisis in Malaysia. Both magnitude and direction of EM are studied and compared with EM during the pre-crisis period. In the case of Malaysia, the Malaysian Accounting Standards Board (MASB) adopted the international accounting standards, i.e. the International Financial Reporting Standards (IFRS) just two years prior to the crisis period. These standards could have some influence on EM during the global financial crisis period in Malaysia, thus are also taken into consideration in this study. Methodology: Data were collected from the Bloomberg database, and the proxy for EM was discretionary accruals (DA), which were measured using two models, namely the modified Jones model by Dechow et al. (1995) and the modified Jones model by Kothari et al. (2005). Findings: The empirical findings of paired-sample T-tests for 1,189 firm-years revealed that EM practices in the Malaysian companies were income decreasing during the crisis period (2008 and 2009), compared to the pre-crisis period (2005 and 2006) when the practices were income-increasing. The findings of this study are consistent with big bath theory. Furthermore, simple multivariate regressions support the findings that EM is significantly more negative or less positive during the crisis period. Nevertheless, the adoption of IFRS seems to suggest some deterring influence on EM practices of Malaysian companies. Research Limitation: The limitation of this study is that it uses rudimentary measures to proxy crisis period and IFRS in the regressions. Moreover, this study includes only one control variable (company size). Practical implication: the findings of this study would inspire more research on EM during abnormal periods, such as a financial crisis period, whilst taking accounting regulation into consideration, particularly in Asian countries. In addition, the policy makers might give more attention to ensure the enhancement of the adherence of IFRS adoption. Originality: The paper addressed a practical issue of EM during crisis period using two different proxies. In addition, the paper applied the integrated variable CriIFRS, which reflects the crisis period, taking into consideration IFRS adoption. Albeit preliminary, this is considered the main originality and novelty of the current study.

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Section: Literature Reviewmentioning

confidence: 99%

Earnings Management in Malaysian Companies during the Global Financial Crisis and the Coincidental Effect of IFRS Adoption

Ayedh¹,

Fatima²,

Mohammad³

2019

AABFJ

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“…Nevertheless, this outcome is consistent with Hackston and Milne (1996) and Mohamed Zain (1999), who argue that financial performance is not entirely related to CSRD. Masruki et al (2010) also state that the overall purpose and existence of an IFI is linked to fulfilling socio-economic related objectives, including the creation of a just society instead of masquerading as another profit-driven entity. Thus, financial performance, as measured by bottom line ROA, should not be regarded as the predominant benchmark for the IFIs to undertake CSR activities.…”

Section: Resultsmentioning

confidence: 99%

“…This outcome arises because the agent (management) is expected to act in the best interest of the principal (shareholders), as the principal unquestionably trusts the agent to run the business to the best of their ability. Nevertheless, from the Islamic perspective, Haniffa (2002) argues that a company is deemed to establish Masruki et al (2010) discover no correlation between the practice and level of profitability upon examining the CSR reporting practices of 18 Islamic banks. They conclude that such a finding arose from the banks' higher dependency on "conventional" business aims.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…The prevailing literature on corporate reporting suggests that CSRD is primarily influenced by various factors, including those related to financial performance (e.g., Ghani & Said, 2010;Masruki et al, 2010;Lungu et al, 2011;Malin et al, 2014), SSC establishment (e.g., Karim, 1995;Hameed, 2009;Farook, et al, 2011), ownership structure (e.g., Archer et al, 1998;Farook et al, 2011), governance characteristics (e.g., Said et al, 2009), and company size (e.g., Othman et al, 2009;Masruki et al, 2010). These findings consequently call for the investigation of the exclusive role of IFIs in an Islamic-based CSR reporting environment as opposed to the conventional secular-based one.…”

Section: Introductionmentioning

confidence: 99%

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Effects of Financial Performance and Governance on Corporate Social Responsibility Disclosure: Evidence from Islamic Financial Institutions in Malaysia

Yusoff¹,

Khadijah²,

Darus³

2018

GJAT

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Islamic financial institutions (IFIs) are established based on Islamic foundations and their corporate practices are expected to be aligned with Islamic laws and framework. This study seeks to understand the determinants for the CSR disclosure of IFIs in Malaysia. Using the 2010 annual reports of 37 IFIs, this study investigates the effects of financial performance and corporate governance mechanism (proxied by Shariah supervisory committee or SCC and ownership structure) on CSR disclosure. Results reveal that between financial performance and SCC and ownership structure, only the latter significantly influences CSR disclosure. Overall, the findings offer insights into current reporting practices and propose ideas pertaining to the establishment of an Islamic-based CSR reporting framework. The significant factors influencing CSR disclosure may be used to develop effective practice among IFIs in Malaysia and other countries.

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“…The results show that earnings reserves have been released strategically in quarters with moderate economic growth. Masruki and Azizan (2012) investigates the impact of Asian financial crisis to earnings management and operating performance on 100 Malaysian listed firms from 1999 to 2002. They report that firms tend to choose income-increasing strategies, specifically when the operating performance is extremely poor following the crisis period.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Corporate Governance and Earnings Management Practices among Listed Firms: A Study on Post Stock Market Crisis Period in Bangladesh

Muktadir-Al-Mukit

Keyamoni²

2019

Journal of Asian Business Strategy

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This paper investigates the effect of corporate governance on earnings management practice of listed firms in Bangladesh during post stock market crisis period. The data set consists of 300 firm year observation from 2011-15. We have used six (6) corporate governance variables as independent variables namely board Size, CEO duality, board independence, board meeting, audit committee independence and ownership concentration. Leverage and firm size have been used as control variables. Our dependent variable is earnings management measured by discretionary accruals following Original Jones Model. Our panel data regression reveals CEO duality and audit committee independence have significant relationship with earnings management practices. This paper fills a gap in the literature by providing evidence about the effect of corporate governance quality on listed firms' earnings management behavior in the context of stock market volatility. Finally, the study suggests that listed firms should enhance their compliance with corporate governance standards which will assist to constraint the unethical practices of earnings management. Contribution/ Originality: This paper has the potential to contribute empirically to corporate governance literature by investigating how corporate governance structure is associated with firm's earnings management behaviour during post stock market crisis periods especially in context of the developing market.

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The Impact of Asian Financial Crisis to Earnings Management and Operating Performance in Malaysia

Cited by 12 publications

References 0 publications

Earnings Management in Malaysian Companies during the Global Financial Crisis and the Coincidental Effect of IFRS Adoption

Earnings Management in Malaysian Companies during the Global Financial Crisis and the Coincidental Effect of IFRS Adoption

Effects of Financial Performance and Governance on Corporate Social Responsibility Disclosure: Evidence from Islamic Financial Institutions in Malaysia

Corporate Governance and Earnings Management Practices among Listed Firms: A Study on Post Stock Market Crisis Period in Bangladesh

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