Board Structure and Earnings Management in Malaysian Government Linked Companies

Abstract

Abstract With increasing number of corporate scandals and failures, corporate governance has become a common and controversial issue last few decades specifically on the role of board of directors in enhancing the performance of firms and mitigating earnings management activities. Numerous research have investigated the relationship between earnings management and board structure in Public Listed Companies (PLCs), but limited study has focused on Government Linked Companies (GLCs). The current study examines relationship between corporate governance mechanism being board structure and earnings management. This study used a sample of 26 Malaysian listed GLCs from various industries excluding the finance industry. Data were collected from the annual report for a period of six years from year 2005 until 2010. Multiple regression analysis was used to test the hypotheses. The results provide significant support on the association between boards of directors’ composition towards earnings management.