Hafiza Aishah Hashim

Board characteristics, ownership structure and earnings quality: Malaysian evidence

Purpose – The relationship between the board characteristics (i.e. board independence, CEO duality, board size, board meeting and board tenure) and the ownership structure (i.e. managerial ownership, family ownership and institutional ownership) and earnings quality is examined. Design/methodology/approach – Data from 280 non-financial companies listed on Bursa Malaysias Main Board for the year 2004 is used. Findings – Significant association was found between board tenure and earnings quality. In addition, a positive significant association was found between outside board ownership and family ownership and earnings quality. However no significant relationship was found between board of directors’ independence and earnings quality. Research limitations/implications – The association between audit committees’ characteristics and earnings quality was not examined. An examination of the impact of ownership structure on boards of directors and audit committees is warranted. An investigation of the impact of the ownership structure on earnings quality in Malaysia using separate test on family-controlled and non-family-controlled firms is suggested. Practical implications – The appropriateness of policy directives requiring majority independent directors may be considered by policy makers. Originality/value – The conflict of interest between outside shareholders and managers in a diffused ownership support the agency theory. However, utility of agency theory to explain the conflicts between the controlling owners and the minority shareholders where ownership concentration is prevalent is limited. Whilst demonstrating the dominant impact of ownership structure on earnings quality in Malaysia the study calls for alternative explanations of corporate governance practices in different institutional settings.

Corporate governance mechanisms and cost of debt

Purpose - – The purpose of this study is to determine whether there is any difference in the association among the board of directors, audit committee effectiveness and the cost of debt between the family- and non-family-owned companies in the Sultanate of Oman. Design/methodology/approach - – This study uses a panel data set that has multiple observations on the same economic units. Each element has two subscripts: the group identifier, i (68 companies listed on the Muscat Securities Market), and within the group index denoted by t, which identifies time (2005-2011). The regression model of this study is based on the random effects model, which, according to the Hausman and Breusch-Pagan (LM) (Breusch and Pagan, 1980) tests, is an appropriate model. Findings - – This study finds that the association between a board of directors’ effectiveness and cost of debt is negative and significant for the full sample and non-family firms. This relationship, however, is weak and not significant for family firms. Additionally, this study indicates that audit committee effectiveness has a significant effect on the cost of debt based on the full sample and family firms, but is not significant for non-family firms. Originality/value - – This study examines firms in the Sultanate of Oman, where family ownership control is common. Based on a framework conceptualized according to the agency theory, using data from Oman enables a comparison between family and non-family firms with respect to the effect of the board of directors’ and audit committee’s characteristics as a composite measure. This composite measure captures their combined effect on the propensity of the cost of debt.

The Breadth and Depth of Related Party Transactions Disclosures

This paper reviews the existing requirement on related party transactions (RPTs) disclosure in the Malaysian context and discusses issues surrounding such disclosure. As there are two conflicting effects of RPTs, sufficient information should be made available to assist investors in analyzing the risk and return of RPTs. We review prior studies and highlight issues of information disclosure related to RPTs, such as the variations in the level of RPTs disclosure. We propose future research on RPTs to apply content analysis using a voluntary disclosure index to understand more about the breadth and depth of the RPTs information.

The interaction effect of corporate governance and CAMEL framework on bank performance in Malaysia

This study conducts an analysis of interaction effect between corporate governance and CAMEL framework (capital adequacy, asset quality, management competency, earning quality, liquidity) toward bank performance in Malaysia. The study highlights the corporate governance as a moderator to CAMEL framework in enhancing the bank performance. Additionally, to closely examine the interaction effect, the simple slope test is employed in this study to investigate the impact of high and low corporate governance toward CAMEL framework and bank performance. The result indicates that capital adequacy, management competency, earning quality and liquidity have a significant relationship with bank performance when interacting with corporate governance. However, the result of simple slope test shows that management competency and liquidity have a better interaction with high corporate governance. The outcome of the study should be to provide vision to the corporate governance bodies in Malaysia, depositors, investors, stakeholders and also researchers to adopt and increase knowledge especially on how corporate governance and CAMEL framework could improve bank performance.

Accounting Irregularities in Related Party Transactions

This paper presents financial reporting issues surrounding Related Party Transactions (RPTs). While RPTs can be value-enhancing for companies, those that are used to expropriate shareholders’ wealth may need to be shielded by accounting irregularities. We discuss the theoretical link between RPTs and accounting irregularities and review evidence on accounting irregularities involving RPTs. We also discuss issues with the existing evidence and suggest that future research should work towards identifying: a) the background of RPTs that served as expropriation mechanism, b) the types of RPTs that normally involved accounting irregularities, and c) the effect of accounting irregularities involving RPTs. The results of studies with such approach may benefit the regulators in curbing accounting irregularities, especially those that involved RPTs.