Emelia A. Girau, Imbarine Bujang, Agnes Paulus Jidwin and Jamaliah Said
This study aims to examine the relationship between corporate governance and the likelihood of corporate fraud in Malaysia.
Abstract
Purpose
This study aims to examine the relationship between corporate governance and the likelihood of corporate fraud in Malaysia.
Design/methodology/approach
The sample of fraudulent companies in this study is the public listed companies that were charged with furnishing false statements to the Securities Commission of Malaysia and Bursa Malaysia Securities Berhad and was listed in the Malaysian Securities Commission Enforcement Release from the year 2000 to 2016. The non-fraudulent companies, which are the control companies in this study, were selected from public listed companies listed in Bursa Malaysia, based on their similarity to the fraudulent companies in terms of time, size and industry type. The panel probit regression analysis was used to examine the relationship between corporate governance characteristics and the occurrence of corporate fraud.
Findings
The findings of this study suggest that board size and executive directors’ compensation are the corporate governance characteristics that can effectively combat corporate fraud incidences in Malaysia. The corporate governance features, namely the board of directors’ independence, frequency of board meetings, CEO duality, CEO’s age, and share ownership owned by directors and CEO, do not significantly influence corporate fraud incidences in Malaysia.
Originality/value
Although previous studies provide inconsistent findings on the association between board size and corporate fraud incidences, this study contributes to the existing literature by providing empirical evidence that smaller board sizes provide more effective monitoring functions to minimize corporate fraud incidences in the Malaysian context. The empirical evidence also supports the agency theory proposition where managers with high compensation will act in the best interest of shareholders and less likely to focus on their interests, thus deterring them from committing fraudulent acts.
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Yvonne Joseph Ason, Imbarine Bujang, Agnes Paulus Jidwin and Jamaliah Said
Prior studies had documented that CEOs with accounting backgrounds are more conservative as compared to their non-accounting backgrounds counterparts. However, prior studies also…
Abstract
Purpose
Prior studies had documented that CEOs with accounting backgrounds are more conservative as compared to their non-accounting backgrounds counterparts. However, prior studies also suggested that CEOs with accounting backgrounds tend to engage in earnings management activities because they have the knowledge to do so. Motivated by these findings, this study aims to examine empirically the possibility of executive compensation to play a moderating role in influencing the behaviour of CEO with accounting backgrounds towards earnings management.
Design/methodology/approach
This study uses the data from 2013 to 2017 from Malaysian FTSE Top 30 companies. The data on the education backgrounds of the CEOs were collected manually from the companies’ annual reports. CEOs with accounting qualification was coded 1, and 0, otherwise. The earnings management were the discretionary accruals estimated using the modified Jones (1991) model. Meanwhile, the data on executive compensation was also collected manually from the companies’ annual reports. All other governance data were also collected manually from the annual reports, and financial data was collected using the Thompson Reuters DataStream application.
Findings
This study found that compensation suffered multicollinearity with the CEO accounting background, thus ineligible to act as a moderating variable between the latter and earnings management. The result further documented a negative but insignificant relationship between compensation with earnings management.
Originality/value
This study discusses the possibility of executive compensation as a moderating variable in the relationship between CEOs with accounting backgrounds and earnings management, whereby, to the authors’ best knowledge, such a discussion is limited in the existing literature.
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Flicia Rimin, Imbarine Bujang, Alice Wong Su Chu and Jamaliah Said
This paper aims to examine the effect of setting up a separate risk management committee (RMC) on the performance of listed companies in Malaysia's consumer goods sector. The…
Abstract
Purpose
This paper aims to examine the effect of setting up a separate risk management committee (RMC) on the performance of listed companies in Malaysia's consumer goods sector. The study considers several firm characteristics as control variables to influence the establishment of the RMC, such as firm size and leverage.
Design/methodology/approach
The sample comprises 169 observations throughout a nine-year time frame starting from 2010 to 2018. The current study used a dichotomous variable of “1” to represent a listed company that establishes a separate RMC and “0” as otherwise. The data analysis is based on a static panel data technique, which utilised the fixed effects model (FEM) and random effects model (REM).
Findings
There is a significant positive relationship between a separate RMC and Tobin's Q which suggests that the establishment of a separate RMC that consists of a majority of independent non-executive directors would significantly improve the firm's performance. The current work supports agency theory which suggests that independent non-executive directors can enhance the transparency of corporate boards as they improved the firm's compliance with the disclosure requirements.
Originality/value
Proper risk management and internal control are critical aspects of a company's governance, management and operations that can influence a firm's performance. The empirical evidence contributes to the knowledge of corporate governance within the context of a RMC’s role in monitoring a company's risk management framework, policies and its implementation. The formation of a separate RMC as a board committee will help to enhance the effectiveness of the risk oversight role of the BOD.