Abstract
On 26 April 2017 Securities Commission Malaysia has released new Malaysian Code of Corporate Governance (MCCG 2017) replacing MCCG 2012 with several changes and recommendations to enhance corporate’s accountability, transparency and sustainability. Therefore, the objective of this study is to compare the degree of compliance of this new MCCG 2017 among healthy companies and likelihood of fraudulent financial reporting companies using PN17 companies as a proxy. This study used content analysis of MCCG 2017 and disclosures provided in the annual report of the companies and analyzed it using descriptive statistics. We find that the degree of compliance even among healthy companies in Malaysia in terms of board diversity and board remuneration is still insufficient, and some of the companies are still reluctant to comply. This study provides initial evidence on the effect of new amendment of MCCG 2017 on the likelihood of fraudulent financial reporting in Malaysia.
Highlights
The fraudulent financial reporting has been a controversial topic worldwide
Malaysia faced the same cases as US, UK, Italy such as Transmile Group which fall into bankruptcy in 2007 resulted loss in market capitalization of 1.2 billion in 2007, Megan Media which the company incurred 1.27 billion and negative cash flow of 897 million (Hamid et al, 2013), Port Klang Free Zone (PKFZ) and the recent corporate scandal involved Federal Land Development Authority (FELDA) where RM1 billion being transferred through dubious means in 2015 (Ismail, Nawani, Smith, & Puteh Salin, 2018)
Malaysia once again hit by the most controversial corporate scandal known as 1 Malaysia Development Berhad (1MDB) where RM4.5 billion worth of money was laundered via series of complex transactions and fraudulent shell companies with bank accounts located in Singapore, Switzerland, Luxembourg and the United State (Ismail et al, 2018)
Summary
The fraudulent financial reporting has been a controversial topic worldwide. This is because of the enormous losses incurred by the companies or organizations after the crime was revealed. The fraudulent financial reporting opened the world's eyes through the collapse of big companies such as Enron Corporation, Worldcom, Parmalat in the early 2000s. The fraudulent financial reporting, known as white-collar crime, came in many reasons such as the possession materials, money, power, and privilege (Scholtz, 2013). Malaysia once again hit by the most controversial corporate scandal known as 1 Malaysia Development Berhad (1MDB) where RM4.5 billion worth of money was laundered via series of complex transactions and fraudulent shell companies with bank accounts located in Singapore, Switzerland, Luxembourg and the United State (Ismail et al, 2018)
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