Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway

This study aims to investigate the relationships between discretionary accrual earnings management (DEM), real earnings management (REM), institutional ownership, and audit quality in Malaysian firms. The study's findings are expected to offer insights into how these factors may influence Malay...

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Bibliographic Details
Published in:International Journal of Management and Sustainability
Main Author: Ali S.M.; Norhashim M.; Jaffar N.
Format: Article
Language:English
Published: Conscientia Beam 2023
Online Access:https://www.scopus.com/inward/record.uri?eid=2-s2.0-85181956189&doi=10.18488%2f11.v12i4.3536&partnerID=40&md5=fa337b41f3fcfd61e1afdbf9cc65e59a
id 2-s2.0-85181956189
spelling 2-s2.0-85181956189
Ali S.M.; Norhashim M.; Jaffar N.
Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
2023
International Journal of Management and Sustainability
12
4
10.18488/11.v12i4.3536
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85181956189&doi=10.18488%2f11.v12i4.3536&partnerID=40&md5=fa337b41f3fcfd61e1afdbf9cc65e59a
This study aims to investigate the relationships between discretionary accrual earnings management (DEM), real earnings management (REM), institutional ownership, and audit quality in Malaysian firms. The study's findings are expected to offer insights into how these factors may influence Malaysia's progress towards the Sustainable Development Goals. We examine the relationship between DEM and REM to identify the potential simultaneous use of earnings management strategies. Additionally, we explore the impact of institutional ownership and audit firm size on a company's earnings management practices. Using data from the Kuala Lumpur Stock Exchange (KLSE) spanning 2016-2018 we conducted statistical analyses, including ANOVA, t-tests, and multiple regression. There were notable correlations between DEM and REM, suggesting that these earnings management techniques are being used concurrently. Notably, institutional ownership and audit firm size played substantial roles in firms' earnings management practices. Companies with higher institutional ownership and larger audit firms tended to exhibit lower levels of DEM and REM. However, these factors did not appear to moderate the DEM-REM relationship. These findings have critical implications for regulators and policymakers in addressing earnings management practices and enhancing corporate governance in Malaysia. Focusing on institutional ownership and audit firm size may help curtail such practices, contributing to Malaysia's progress towards the Sustainable Development Goals. Future research should explore other potential moderating variables and distinctive corporate governance features that could also impact the DEM-REM relationship. © 2023 Conscientia Beam. All Rights Reserved.
Conscientia Beam
23069856
English
Article
All Open Access; Gold Open Access
author Ali S.M.; Norhashim M.; Jaffar N.
spellingShingle Ali S.M.; Norhashim M.; Jaffar N.
Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
author_facet Ali S.M.; Norhashim M.; Jaffar N.
author_sort Ali S.M.; Norhashim M.; Jaffar N.
title Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
title_short Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
title_full Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
title_fullStr Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
title_full_unstemmed Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
title_sort Exploring earnings management: Institutional ownership and audit size in Malaysia’s sustainability pathway
publishDate 2023
container_title International Journal of Management and Sustainability
container_volume 12
container_issue 4
doi_str_mv 10.18488/11.v12i4.3536
url https://www.scopus.com/inward/record.uri?eid=2-s2.0-85181956189&doi=10.18488%2f11.v12i4.3536&partnerID=40&md5=fa337b41f3fcfd61e1afdbf9cc65e59a
description This study aims to investigate the relationships between discretionary accrual earnings management (DEM), real earnings management (REM), institutional ownership, and audit quality in Malaysian firms. The study's findings are expected to offer insights into how these factors may influence Malaysia's progress towards the Sustainable Development Goals. We examine the relationship between DEM and REM to identify the potential simultaneous use of earnings management strategies. Additionally, we explore the impact of institutional ownership and audit firm size on a company's earnings management practices. Using data from the Kuala Lumpur Stock Exchange (KLSE) spanning 2016-2018 we conducted statistical analyses, including ANOVA, t-tests, and multiple regression. There were notable correlations between DEM and REM, suggesting that these earnings management techniques are being used concurrently. Notably, institutional ownership and audit firm size played substantial roles in firms' earnings management practices. Companies with higher institutional ownership and larger audit firms tended to exhibit lower levels of DEM and REM. However, these factors did not appear to moderate the DEM-REM relationship. These findings have critical implications for regulators and policymakers in addressing earnings management practices and enhancing corporate governance in Malaysia. Focusing on institutional ownership and audit firm size may help curtail such practices, contributing to Malaysia's progress towards the Sustainable Development Goals. Future research should explore other potential moderating variables and distinctive corporate governance features that could also impact the DEM-REM relationship. © 2023 Conscientia Beam. All Rights Reserved.
publisher Conscientia Beam
issn 23069856
language English
format Article
accesstype All Open Access; Gold Open Access
record_format scopus
collection Scopus
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