Siti Zaidah Turmin

Family-Controlled Companies and the Issuance of Going-Concern Opinion in Malaysia

Empirical assessments on governance mechanisms’ effect on the likelihood of going-concern opinion (GC opinion) issuance by auditors are numerous in developed market, but scarce in developing and less litigious market like Malaysia. This study attempted to examine the association between Malaysian family-controlled companies in respect of the level of family influence in corporate setting and the issuance of GC opinion. Family control concept is operationalized in two ways: (1) proportion of founding family as board directors and (2) percentage of family ownership. This study utilized a sample of data on Malaysian financially distressed listed companies from the period of 2008 to 2011. Analysis showed that the degree of family control was not associated with propensity of GC opinion issuance. The findings also reflected the effect of the presence of family owners particularly on the appropriate issuance of GC opinion and on audit quality in general. The output of this study is relevant to Malaysian and comparable contexts, which may be utilized as an input to refine and/or reformulate future corporate governance codes and policies.

Earnings Quality of Malaysian IPO firms: The Effect of Share Moratorium Provision and Institutional Ownership☆

The paper focuses on earnings quality (EQ) of Malaysian Initial Public Offering (IPO) firms and examines the effect of share moratorium regulation and institutional ownership on IPO firms’ EQ behavior. Analyzing both real and accrual earnings management (EM) to measure EQ of 220 sample IPO firms over the period from 2002 to 2009, the results indicate that Malaysian IPO firms engage in both real and accrual discretionary EM. Both EQ measures are also observed to be similar between firms with and without share moratorium provision, evidencing the support towards Malaysias public policy guideline of subjecting all IPO firms to share moratorium regulations as a commitment device to reduce information asymmetry and adverse selection problem between the strategic owners and new investors. The multivariate results further indicate the effective monitoring of institutional shareholders over investee firms’ EQ. The overall results collectively suggest the need for investors to examine investee firms’ real activity discretionary behavior in their investment decisions while regulators should device means of constraining it.