Al-Absy, Mujeeb Saif Mohsen and Ku Ismail, Ku Nor Izah and Chandren, Sitraselvi and Al-Dubai, Shehabaddin Abdullah A. (2020) Involvement of board chairmen in audit committees and earnings management: Evidence from Malaysia. The Journal of Asian Finance, Economics and Business, 7 (8). pp. 233-246. ISSN 2288-4637

PDF Restricted to Registered users only Download (452kB) | Request a copy

Abstract

This paper investigates the effect of the involvement of the board chairman in the audit committee (AC) on earnings management (EM). It examines Bursa Malaysia-listed companies with the lowest positive earnings for the years 2013 to 2015. The Modified Jones Model by Kasznik (1999) was used to determine discretionary accruals. An AC that includes its board chairman as an ordinary member is associated with greater discretionary accruals. However, a board chairman who is also the chairman of the AC does not seem to influence discretionary accruals. This paper supports the agency theory and policy-makers’ efforts to prevent board chairmen from sitting on ACs. It is the first study that uses the agency theory to describe the association between the board chairman’s involvement in the both AC and EM. This study alerts policy-makers, stakeholders and researchers to the influence of a board chairman serving on the AC in curbing EM. Furthermore, it provides empirical evidence that the majority of Malaysian companies whose board chairmen are involved in the AC appoint the chairman as an ordinary member of the AC. This indicates that executive directors may affect such actions. Hence, more policies are needed to improve AC independence.

Item Type:	Article
Uncontrolled Keywords:	Board Chairman, Audit Committee, Accrual Earnings Management, Real Earnings Management, Malaysia
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions:	Tunku Puteri Intan Safinaz School of Accountancy (TISSA)
Depositing User:	Mrs. Norazmilah Yaakub
Date Deposited:	26 Aug 2020 13:02
Last Modified:	26 Aug 2020 13:02
URI:	https://repo.uum.edu.my/id/eprint/27378

Actions (login required)

View Item