Malaysian Government-Linked Companies and Earnings Management: The Interaction Effects of Internal And External Governance Mechanisms

Wyei Leng  Ma; Noor Adwa  Sulaiman; Azlina Abdul  Jalil

Wyei Leng Ma Lecturer
Noor Adwa Sulaiman Associate Professor
Azlina Abdul Jalil Senior Lecturer

Keywords: Earnings management, government-linked companies, corporate governance, interaction effects

Abstract

This study aims to explore the interaction effects of the audit committee (AC), the internal audit function (IAF), as well as the external auditors (EA) toward earnings management between government-linked companies (GLCs) in Malaysia. This study used regression analysis on 340 firm-year-based observations with Malaysian GLCs available on the Bursa Malaysia main board during the 2009 – 2018. This study found that the interaction between the AC and the IAF is significantly and negatively correlated with EM. However, the AC's interaction with the EA shows an insignificant relationship in reducing EM. Additionally, the interaction between EA and the IAF negatively affects EM. It is one of the first papers to explore the complementary impact of external and internal corporate governance functionality or mechanisms on EM.

Author Biographies

Wyei Leng Ma, Lecturer

Ma, Wyei Leng, holds the position of Lecturer at Tunku Abdul Rahman University of Management and Technology. She earned her Master of Accounting from University of Malaya, Malaysia. Her research interests include financial reporting, auditing and corporate governance. She has a publication in Jurnal Pengurusan.

Author’s contact detail: Address: Division of Accounting, Finance and Business, Centre for Pre-University Studies, Tunku Abdul Rahman University of Management and Technology, 53300 Kuala Lumpur, Malaysia; Email: mawl@tarc.edu.my

Noor Adwa Sulaiman, Associate Professor

Sulaiman, Noor Adwa, holds the position of Associate Professor at Department of Accounting in Faculty of Business and Economics, University of Malaya. She earned her PhD in Accounting from Manchester Business School, University of Manchester, United Kingdom. Her research interests include auditing and governance. She has publications in Accounting, Auditing and Accountability Journal and Meditari Accountancy Journal. Author’s contact detail: Address: Department of Accounting, Faculty of Business and Economics, Universiti Malaya, 50603 Kuala Lumpur, Malaysia; Email: adwa@um.edu.my

Azlina Abdul Jalil, Senior Lecturer

Abdul Jalil, Azlina, holds the position of Senior Lecturer at University of Malaya. She earned her PhD in 2014 in Accounting from Deakin University, Australia, MAcc in 2008 in Accounting from UiTM, Malaysia and her BSc in 1999 in Accounting and Finance from LSE, United Kingdom. Her research interests include corporate governance, financial reporting quality and sustainability. She has publications in Plos One, Accounting Research Journal, Cogent Business and Management and Jurnal Pengurusan.

Author’s contact detail: Address: Department of Accounting, Faculty of Business and Economics, Universiti Malaya, 50603 Kuala Lumpur, Malaysia; Email: azlinajalil@um.edu.my

References

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