Ku Nor Izah Ku Ismail

Does Having Women on Boards Create Value? The Impact of Societal Perceptions and Corporate Governance in Emerging Markets

Many governments seek to impose gender equality on boards, but the consequences of doing so are not clear and could harm firms and economies. We shed light on this topic by conceptualizing the relationships as firm- and board-specific and embedded within specific contexts. The theory is developed with reference to emerging markets, and tested on Malaysian firms. We find that female directors create value for some firms and decrease it for others. The impact varies across different performance indicators, firms’ ownership and boards’ structure. The findings call for nuanced responses in relation to women’s nominations from both governments and firms.

Disclosure of Voluntary Accounting Ratios by Malaysian Listed Companies

Accounting ratios are believed to be of fundamental importance in financial analysis, and therefore are useful addition to financial reports. This paper examines the reporting of voluntary accounting ratio by Malaysian companies in corporate annual reports. Drawing on agency and signaling theories, this paper explores whether associations exist between company performance and voluntary disclosure of accounting ratios. In particular, associations are tested between the extent of ratio disclosure and company performance (nmaely profitability, liqudity, leverage, and company effiency), size and industry. Six hypotheses are tested using data collected from 2003 annual reports of 100 Malaysian listed companies. This paper provides evidence that the extent of voluntary ratio disclosure is low; and size, industry as well as liquidity significantly influence the reporting of ratios in corporate annual reports. The implications of these findings are discussed.

Board diversity and intellectual capital performance

Purpose - – The purpose of this paper is to investigate if the effectiveness of board meetings moderates the relationship between board diversity (in terms of educational level and nationality) and intellectual capital (IC) performance. Design/methodology/approach - – The empirical data are drawn from banks’ annual reports over the three-year period of 2008 to 2010. Public’s value-added intellectual coefficient method is applied to measure IC performance. The frequency of board meetings is used a proxy for board meeting effectiveness. Findings - – Based on the hierarchical regression analysis, our results do not support the hypothesis that the effect of board diversity on IC performance is positive as the effectiveness of board meetings increases. Practical implications - – Findings of this study indicate that there is a need for more effective meetings through providing appropriate and sufficient information to directors, particularly in strategic issues such as those related to IC that could make board members better prepared and more involved in meetings. Originality/value - – This study adds to the literature, as it is the first study that explores the variables that could affect the relationship between board diversity and IC performance in the context of banks.

Women on Boards of Malaysian Firms: Impact on Market and Accounting Performance

We seek to offer some reconciliation for the conflicting theoretical arguments and empirical findings regarding the impact of women’s participation in boards on firms’ performance. We suggest that this impact differs in relation to market- and accounting-performance, and it is firm-specific, and varies by firms’ ownership type and the composition of their boards. These arguments find theoretical underpinnings in agency and resource-dependency theories, combined with behavioral and discrimination theories that articulate women behavior in the workplace and market perception of gender equality. The empirical analysis is based on a dataset of 841 publicly-listed firms in Malaysia. The results show positive impact of women’s participation on accounting-performance and negative impact on market-performance, suggesting that women directors create economic value, which is undervalued by the market. We interpret the findings with reference to the perception of women’s role in society and business in Malaysia, and the nature of corporate governance and ownership types prevalent among Malaysian firms. We suggest that the relationships might be context-specific, and hence the desired level of women’s participation varies across countries. We discuss the normative implications of the findings for government authorities considering legislation of gender-quota on boards, and for firms.

Cross-country comparison of intellectual capital performance and its impact on financial performance of commercial banks in GCC countries

Purpose - The purpose of this paper is to explore the intellectual capital (IC) performance of banks in GCC countries and to empirically investigate if IC has an impact on financial performance as well as to identify the IC components that may be the drivers of the traditional indicators of bank success. Design/methodology/approach - The empirical data are drawn from banks` annual reports over the three-year period of 2008 to 2010. OLS regression analysis is constructed to examine the relationships between IC and the banks` financial performance indicators. Pulic’s value-added intellectual coefficient method (VAIC) is applied to measure IC performance. Findings - Empirical findings, after controlling for bank size and global financial crisis, indicate that IC is positively associated with bank financial performance indicators in all GCC countries. However, when VAIC is split into its three components, the relationships between these components and bank financial performance indicators are varied. Research limitations/implications - The main limitation of this study is the use of Intellectual capital measurement model. Its basic advantage (simplicity and ease of use) is also its main limitation. The main problem is measuring the contribution of something which is not physical and can’t be easily quantified. The key issue is that the value created by IC is indirect. However at present no perfect solution is available for intellectual capital measurement as the area is still exploring the best possible solutions. Practical implications - The results may extend the understanding of the role of IC in banking sector in GCC region, and may give inputs to managers of GCC banks to structure relevant strategies to obtain, utilize, develop and retain IC. The findings also could help policy makers in GCC to formulate and implement policies for establishing a resilient banking sector. Originality/value - This study adds to the literature by extending the knowledge of IC performance and its utilization for increasing the financial performance of GCC banks. There has only been one previous empirical study that explores the IC and its relationship with the traditional measures of bank performance in GCC region (only in Bahrain). It is the ?rst comparative study across GCC countries.

An investigation into the effect of surplus free cash flow, corporate governance and firm size on earnings predictability

Purpose - – Existing studies on corporate governance mainly focus on how a strong governance system enhances the valuation of firms with cash holding or free cash flow agency problem. The aims of this paper are threefold. First, it investigates the impact of surplus free cash flows (SFCF) on earnings predictability. Second, it investigates whether corporate governance variables moderate the negative impact of SFCF on earnings predictability. Finally, this study examines whether the ability of corporate governance to mitigate SFCF and improve the predictive value of earnings varies between large and small firms. Design/methodology/approach - – This paper uses heteroskedasticity-corrected least square regressions upon a sample of Malaysian listed firms. Findings - – This paper finds that firms with high SFCF experience less earnings predictability. It also indicates that earnings of firms with high SFCF are more predictable when institutional investors hold a large stake of shares and when a chairperson is independent. Finally, this paper reveals that the role of institutional and managerial ownership in mitigating agency conflict of free cash flow and improving earnings predictability is more prominent in larger firms. This study implies that investors still have reservations about the ability of boards to enhance earnings numbers in Malaysia, although efforts were taken to reform the corporate governance mechanisms following the Asian financial crisis. Originality/value - – This research is considered as the first attempt to examine the relationships between SFCF, corporate governance, firm size, and earnings predictability in a developing county such as Malaysia. The findings of this paper serve as a wake-up call to policy makers to evaluate the importance of governance structure in enhancing earnings predictability in emerging economies.

Cash Holdings, Political Connections, and Earnings Quality: Some Evidence from Malaysia

Purpose - – The purpose of this paper is to investigate the influence of cash holding, political connection and their interaction effect on earnings quality in the Malaysian environment, where political influence plays a vital role in many aspects of business dealings and resources allocation is seriously affected by politics. Design/methodology/approach - – This paper uses ordinary least square and seemingly unrelated regressions upon a sample of the Malaysian top 100 listed firms. Findings - – This paper finds that earnings of firms with excess cash reserves are of high quality. Consistent with previous research, the study finds that investors perceive earnings numbers of politically connected firms as being of low quality. However, this research fails to support an expectation that the adverse consequences of holding a large amount of cash to earnings quality would be more pronounced when political extraction is high. The findings of this study suggest that policy makers should encourage or mandate firms to disclose information in relation to their connections with government, political party, or politicians so that investors and all interested parties can use the information to better assess the firms’ earnings quality. Originality/value - – This research is considered as the first attempt to examine the relationships between cash holdings, political connections, and earnings quality in a developing country such as Malaysia.

Women directors, family ownership and earnings management in Malaysia

Purpose - The purpose of this paper is to determine whether the representation of women on the boards (WOMBDs) and audit committees is associated with a reduction in the practice of earnings management and whether women are associated with income reducing (conservative) rather than income-increasing (aggressive) earnings management. The authors further argue that family ownership moderates the relationship between the presence of WOMBDs and audit committees and earnings management. Design/methodology/approach - The study uses non-finance firms listed on Bursa Malaysia over a period of four years, i.e. from 2008 until 2011. Findings - The evidence reveals that the presence of WOMBD or audit committee is not associated with a propensity for earnings management. In addition, the evidence also reveals that family ownership does not interact either with WOMBD or with women on the audit committee (WOMAC) to influence the propensity for earnings management. Nevertheless, the additional analyses show that, while women on boards are not associated with income-decreasing accruals, the presence of women on audit committees leads to income-reducing earnings management. The evidence further reveals that family ownership does not interact with either WOMBD or WOMAC to influence income-decreasing earnings management. Originality/value - This study extends prior research on the role of women directors and women audit committee members on earnings management focussing on family ownership. Further, the study also examines the direction of earnings management as opposed to the most prior studies, which mainly focus on the propensity of earnings management.

The role of corporate governance strength in crisis and non-crisis times

ABSTRACT This study evaluates corporate governance practices of listed firms in the United Arab Emirates and investigates whether corporate governance mitigates/exacerbates the impact of leverage and risk on firm performance during crisis and non-crisis times. The study constructs a corporate governance index not only to examine the dispute of the role of corporate governance during the crisis but also its influence on other factors that fuelled the crisis. A firm-level panel data is used that spans the period 2008–2012 of all listed firms on Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM). The study finds a positive influence of corporate governance strength on the accounting performance, but a negative influence on the firms’ economic performance. In normal times, corporate governance mitigates the negative influence of leverage and risk on the accounting and economic firm performance. However, this synergy effect varies across performance indicators during crisis.

GEZ petrol station: CVP analysis and spread sheet modelling for planning and decision making

Subject area Management Accounting and Financial Modelling. Study level/applicability Undergraduate and post-graduated levels. Case overview Aiman, the Area Manager of GEZ Berhad, realised the importance for petrol station operators to have an understanding of fundamental management accounting concepts such as cost behaviour and cost–volume–profit (CVP) analysis. He also believed that the petrol station operators should be proficient in using Microsoft Excel functionality and able to construct “intelligent” financial model with extended sensitivity analysis. Being a manager responsible for training the petrol station operators, Aiman would like to introduce the CVP concepts and spreadsheet model-building process to the petrol station operators, to aid them in planning and decision making. To construct the Excel spreadsheet model, Aiman sought the assistance of Rizal, a university lecturer in accounting, who in turn gathered the relevant operational and financial data from Baron Service Station, a typical petrol station under GEZ stable. The model should be flexible enough to allow the petrol station operator to anticipate, for example: What will happen to overall profitability of the petrol station if the fuel prices go up? What is the minimum volume of fuel that needed to be sold to break even? How much extra profit can be generated if credit card sale is reduced? and Is it viable to install an automated teller machines (ATM) kiosk and incurring administrative charges from bank to lure more customers to visit the petrol station? As the petrol station sells multiple products (petrol, diesel and convenience goods), the owner is also interested to know which product lines are the most and least profitable. Thus, the model should be able to generate segmented income statement with appropriate allocation of the common fixed costs to the each of the products. Expected learning - outcomes The case discussion is intended to achieve the following learning outcomes: students are able to prepare a financial model which include a segmented contribution income statement based on the information on product mix; students are able to calculate the break-even point and distinguish between fixed and variable costs; students are able to differentiate between traceable fixed costs and common fixed costs; students are able to build a financial model that is sufficiently flexible to allow various what if analysis to be performed; and students are able to use what if analysis tools in Excel such as Goal Seek and Data Tables. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.