Mitigating Earnings Management: Adoption of IFRS and Corporate Governance Practices in Malaysia
Journal Title: International Journal of Academic Research in Business and Social Sciences - Year 2018, Vol 8, Issue 2
Abstract
This study examines the effects of IFRS adoption and corporate governance practices on the qualities of financial reporting in Malaysia. The sample comprises a balanced panel of 360 firm-year observations of Construction firms under the Main Board of Bursa Malaysia from 2013 to 2016. This study accesses the effectiveness of effort by the Malaysian Accounting Standard Board (MASB) to improve the financial reporting by the revision process of the standard and their mandatory application. In addition, this study measures the relationship between of board of directors and the level of earnings management. The composition of board of directors is an important corporate governance mechanism in mitigating earnings management. The Malaysian Code of Corporate Governance (MCCG) has been issued in year 2000 and was revised in 2007 and the latest revision is in 2012 in order to enhance good governance by corporation. Besides MCCG, the year witnessed the full convergence of IFRS effective starting from 1st January 2012. One of the standards of MFRS 111 Construction Contracts focuses on construction companies. Therefore, this study is to examine the impact of IFRS adoption and corporate governance practices on the level of earnings management of Malaysian Construction companies. The results show that there is a significant relationship between the characteristics of board of directors with the level of earnings management during the years after the adoption of IFRS in Malaysia. This suggests the adoption of IFRS and corporate governance practices by that Malaysian construction companies contribute to higher accounting qualities. Thus, the results of this study are expected to provide early evidence of the impact of adopting IFRS and corporate governance practices and give further direction for the regulatory bodies regarding the accounting standards and financial reporting practices in Malaysia. Future research perhaps could analyze the relationship of the characteristics of audit oversight board in mitigating earnings management.
Authors and Affiliations
Wan Razazila Wan Abdullah, Enny Nurdin Sutan Maruhun, Masetah Ahmad Tarmizi, Liyana Ab. Rahman
Keywords
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- EP ID EP560513
- DOI 10.6007/IJARBSS/v8-i2/3983
- Views 61
- Downloads 0
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