The effects of ceos' power, risk management committees' characteristics, and real earnings management in Malaysia: the moderating role of GLICS

• Main Author: Bensaid, Abdessetar
• Format: Thesis
• Language: English; English
• Published: 2022
• Subjects: HD61 Risk Management; HF5601-5689 Accounting
• Online Access: https://etd.uum.edu.my/9592/1/depositpermission_s903555.pdf; https://etd.uum.edu.my/9592/2/s903555_01.pdf; https://etd.uum.edu.my/9592/

Real Earnings Manipulation (REM), as an alternative earnings management technique, has become a concern for investors and regulatory agencies across the globe. Its effect has a direct consequence on the growth and future value of firms. This study aimed to make a meaningful contribution to the existing REM literature by investigating the influence of corporate CEO attributes and the Risk Management Committee (RMC) characteristics on REM by focusing on the non-financial companies listed on the main market of Bursa Malaysia. This study also adds to the body of knowledge by investigating the extent of REM under the presence of powerful CEOs from the perspectives of share-ownership, tenure, financial expertise, founder, honorific title and board independence. Hierarchical regression analysis was employed to explore the moderating effect of dedicated institutional investors on the relationship between CEO attributes and REM. The study sample involved 1707 Malaysian firmyear observations for the period from 2017 to 2019. Three REM models were used to come up with a combined REM proxy. The result shows a significant negative relationship between CEO founders, RMC diligence, RMC independence, dedicated institutional investors and REM practices. In addition, the study finds that CEO ownership, CEO honorific title, CEO power, separate RMC, RMC financial expertise and RMC overlap are associated with high REM. The results also indicate that the interaction of dedicated investors with CEO attributes (share-ownership, founder, board-independence and power) provides active monitoring against REM thus leading to higher earnings quality, implying that dedicated institutional investors tend to align their interests with majority-minority interests and protect shareholders' wealth; thus, leading to higher earnings quality. The results are robust under various additional analyses and model estimations and have implications for policymakers (such as the Securities Commission and the Audit Oversight Board), investors, directors of companies and other market participants in restraining REM practices.