Rohaida Abdul Latif

Women in Board of Directors and Real Earnings Management: Accretive Share Buyback in Malaysia

Gender diversity of boards and reporting of earnings are two most debated issues in the corporate world. In this context, the paper explores how the presence of women directors on the corporate board influence real earnings management through accretive buyback programs. Using a sample of 601 firms’ observations that engage in accretive share buyback from 2010-2015, the findings reveal that existence of women directors on the board is associated with less engagement in accretive share buyback activities. We further find that firms with a higher number of independent directors are less likely to practice real earnings management through accretive buyback programs. Our paper contributes to the debate on gender diversity on boards and its influence on the utilisation of accretive buyback programs as a tool to real earnings management.

The value relevance of purchased goodwill in Malaysian firms: the pre- and post-IFRS evidence

Following the adoption of International Financial Reporting Standards (IFRS) in Malaysia, the accounting for goodwill has changed from systematic amortisation to a method based solely on periodic impairment testing.The objective of the impairment test is to ensure that reported goodwill does not have carrying amount in excess of its recoverable amount.Nevertheless, many critics suggest that the new method may allow managements to engage in opportunistic earnings manipulation activities.In this study, we examine the question of whether goodwill is more value relevant after adoption of an IFRS in Malaysia. Using panel data of non-financial firms listed on the Bursa Malaysia over the period from 2002 to 2010, we find evidence that goodwill is not value relevant in either the pre-and post IFRS periods. These findings are in line with the opponents of the new standards, who claim that, the use Fair Value Accounting (FVA) in the reporting of goodwill increases the opportunities for managerial opportunisms.Therefore, the consequences FVA devoid of relevant information for shareholders.We conclude that the existence of an unfavorable environments in Malaysia impedes efficient implementation of the new impairment regime.

Do big 4 auditors improve the ability of goodwill to forecast future cash flows? the Malaysian evidence

The accounting rules prescribed in Malaysian Financial Reporting Standard (MFRS) 3, Business combination, and (MFRS) 136, Impairment of Assets, give managers considerable reporting discretion in allocating goodwill and estimating its actual value. Agency theory predicts that managers may use the accounting discretion granted by the new rules to pursue their own interests at the expense of shareholders.Hence, auditors are required to exercise professional judgement when investigating hard-to-verify management assumptions and valuations.We exploit this issue by examining whether predictive ability of goodwill improved in the presence of Big 4 auditors. We provide evidence that goodwill has a significant predictive ability for second and third-year ahead cash flows which exists only in the firms audited by the large international reputable accounting firms.This suggests that Big 4 auditors play an important role in ensuring appropriate implementation of the present accounting for goodwill.