Malaysian Firms Research Articles

The Influence of External Audit Quality on Discretionary Accruals and Real Earnings Management Practices: An Analysis of Malaysian Firms

This paper aims to analyse the mitigating effects of external audit quality (EAQ) factors on earnings management (EM) practices. Data were collected from firms listed on Bursa Malaysia’s main market, covering the years 2011 through 2022. Panel regression was employed to analyse the data. The findings of this study confirmed a significant negative association between audit reputation, audit quality, audit opinions, and EM of listed firms in Malaysia. Audit fees and audit tenure were found to be not significant in relation to EM. The study included five control variables in the analysis, and only economic value added (EVA) was found to be significant. The findings suggest that a number of audit quality factors are indicative of EM among listed firms. The authors extend, as well as contribute to, the growing literature on the EAQ, and therefore, wider corporate governance literature. Thus, it provides originality by presenting empirical evidence and outcomes to fully understand how discretionary accrual and real EM affect EAQ in the Malaysian context. Therefore, stakeholders should place higher concern on the selection of an external auditor, and investors should take into account the external audit factors when making investment decisions. Measuring the effectiveness of EAQ allows decision-makers to evaluate how effective employed governance measures are in improving shareholders’ perceptions of financial information quality and mitigating EM practices.

AI Revolution: How Malaysian Firms are Redefining Accounting Performance

Artificial Intelligence (AI) is the primary force behind the organization's continued sustainability and competitiveness. The rise of AI software, cloud computing-based software and blockchain apps and services, together with the use of accounting information outcomes indicate that computerized accounting has become available to accountants. Even if there are great hopes for the application of AI in the accounting industry, numerous nations with little infrastructure are still lagging in using this type of technology. 88.89% of the 80 questionnaires that were initially issued were returned within a week. As a result, of the 80 questionnaires issued, 75 responses were received in one week, yielding a response return rate of 93.75 percent. Managerial and non-managerial staff members from American Express (Malaysia) Sdn. Bhd, Selangor, Malaysia were chosen as research participants. By employing a sample random sampling approach, a total of 75 legitimate surveys were gathered. The results of the study have shown a positive strong relationship between the level of readiness (AI Software, Cloud technology and Blockchain) and level of adoption (AI Software, Cloud technology and Blockchain) in the accounting industry toward employees’ job efficiency. All eight hypotheses (H1 to H8) showed a significant relationship and were all accepted. The outcome of the moderating effect between working tenure and level of readiness presents a direct impact. However, the level of adoption shows an indirect impact on job efficiency whereas job efficiency shows a direct impact.

The effect of board of directors attributes, environmental committee and institutional ownership on carbon disclosure quality

AbstractThis study assesses the effect of the board of directors' attributes, environmental committee (EC), and institutional ownership (IO) on carbon disclosure quality (CDQ) from the perspectives of legitimacy and agency theories in Malaysia. This study collects and analyzes data based on 1000 observations of firms from carbon‐intensive industries from 2015 to 2019. The effect of the board of directors' attributes, EC, and IO on the CDQ was observed using a panel data regression model. The study revealed a significant positive relationship between board independence, board size, female representation, EC, IO, and CDQ. These findings suggest that carbon disclosure awareness is rising in Malaysia as firms have gradually integrated corporate governance (CG) best practices into their business strategies. To the best of our knowledge, this is the first study to examine the factors that influence CDQ in Malaysian businesses. This study identified firms with a higher CDQ using a new global reporting initiative‐based carbon reporting index. This expands the literature on carbon disclosures. This study focuses on carbon‐intensive industries, which might not reflect Malaysia's current CDQ situation. Thus, future research should focus on other sectors to fully grasp the current state of the CDQ in Malaysia and offer new perspectives on emerging markets. The findings may benefit a vast group of regulatory bodies in assessing Malaysian firms' responses to local and international carbon guidelines.

Uncovering the Heterogeneity of Politically Connected Firms in Malaysia: A Novel Methodology

Uncovering the Heterogeneity of Politically Connected Firms in Malaysia: A Novel Methodology

ESG Reporting and Accounting Conservatism of Malaysian Firms

Many studies document that environmental, social, and governance (ESG) reporting is beneficial to firms. We extend the literature to study the relationship between ESG reporting and accounting conservatism. Our sample consists of the top 100 firms by market capitalization listed on Bursa Malaysia. The sample covers the period from 2019 to 2021. Accounting conservatism is measured based on Basu’s (1997) model. Our result shows that accounting conservatism exists among the sample firms. The result also shows that accounting conservatism does not differ between ESG firms and non-ESG firms. Furthermore, the result shows that accounting conservatism does not differ between high-ESG performance firms and low-ESG performance firms.

Board Size and Corporate Performance in the Industrial Property Sector in Malaysia

This research investigates the relationship between the size of the board of directors and the financial performance of publicly listed industrial property firms in Malaysia. The study examines secondary data from annual reports, financial statements, and corporate governance disclosures, focusing on key financial performance indicators such as Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM). The study reveals significant correlations between board size and financial performance using correlation analysis and multiple regression. The findings provide valuable insights for regulators, investors, and business leaders, emphasizing the importance of refining corporate governance standards to ensure long-term financial success in Malaysia's industrial property sector.

Digital Capabilities and Risk Management Practice in Small Accounting Firms in Malaysia

Digital Capabilities and Risk Management Practice in Small Accounting Firms in Malaysia

Unveiling the influence of financial slack on carbon performance: insights from firms in Malaysia’s smart cities

Abstract As carbon emissions in lower-income countries are projected to rise and surpass those of higher-income countries, they face mounting political pressure to fulfil their commitments under international agreements. As a key participant in carbon emissions abatement, firms can have a strong effect on carbon emissions reduction. However, the successful implementation of carbon emission reductions may hinge on the financial slack of firms. This study investigates the impact of financial slack on the carbon performance of Malaysian smart city firms. The sample includes 64 firms located in four smart cities within the ASEAN Smart City Network (ASCN). The analysis is based on data compiled in 2021, with carbon performance data obtained from the annual reports of firms and financial data obtained from the DataStream Refinitiv Eikon platform. Using regression analysis, the results indicate that financial slack has no significant effect on the carbon performance of Malaysian smart city firms. This study contributes to the growing body of knowledge on financial slack and carbon performance in smart cities. The findings could be beneficial for practitioners and policymakers concerned with improving financial flexibility and reducing carbon emissions.

The Influence of Environmental, Social, and Governance (ESG) Performance on Financial Outcomes: The Moderating Role of Board Characteristics in Malaysian Firms

Environmental, Social, and Governance (ESG) factors are becoming more widely acknowledged as essential elements of corporate performance. The objective of this study is to explore the relationship between ESG performance and financial results, with a particular emphasis on businesses located in Malaysia. This study investigates the ways in which the characteristics of boards, specifically the size of boards and the gender diversity of board members, modify this relationship. Using data from 346 Malaysian enterprises, the study discovers a link between ESG performance and operating income. The association between ESG and financial results is strengthened by larger board sizes, whereas board gender diversity does not have a meaningful influence on moderating this relationship. The findings provide insights into corporate governance practices, suggesting that larger boards can amplify the financial benefits of strong ESG performance.

Religious Investor Sentiment, Shariah Compliance Impact, and Theological Risk: Evidence from Bursa Malaysia

This study examines the financial implications of religious restrictions by analyzing how changes in the Shariah compliance status of stocks affect their price and trading volume. Employing the market model in an event study approach and using data from Malaysian firms between 2000 and 2016, the study focuses on 30 announcements from the Security Commission Malaysia’s List of Shariah Compliant Securities (LSCS), resulting in 370 additions and 284 deletions from the compliance list. The findings indicate that the inclusion of stocks in the compliance list generates longterm demand driven by Islamic institutional and Muslim retail investors, leading to a permanent increase in abnormal returns and trading volume. Conversely, the removal of stocks from the compliance list induces short-term negative abnormal returns and increased trading volume, reflecting selling pressure. These results contribute to understanding the financial consequences of religious restrictions, highlighting the influence of Shariah compliance on stock market performance and investor behaviour.

Linking Green Innovation and Business Sustainability: The Mediating Role of Strategic Thinking

Our planet’s growth, progress, and prosperity can be facilitated through innovation, knowledge, and thinking, and such facilitators may also assist in reversing the damage our planet has been experiencing throughout the years. The article determines the relationship between managerial innovation, process innovation, product innovation, and business sustainability among large manufacturing firms in Malaysia with mediating effect of strategic thinking. After extant literature, a research model was developed to examine the formulated study hypotheses, tested on data obtained from 208 large Malaysian manufacturing firms using partial least square-structural equation modeling. The findings showed that the two dimensions of green innovation significantly affected the business sustainability of large manufacturing firms but not green process innovation. Also, green managerial innovation significantly affected strategic thinking but not green process innovation and green product innovation. Strategic thinking also significantly affected business sustainability and fully mediated the green process innovation dimension GPCI but had no mediating effect on green managerial innovation and green product innovation. These results are expected to enlighten researchers and managers of large manufacturing firms concerning the topic under discussion. In addition, this article will assist academicians to understand the influence of managerial innovation, process innovation, product innovation, and business sustainability among large manufacturing firms in Malaysia.

EXPLORING INSTITUTIONAL INVESTORS’ DETERMINANTS OF INVESTMENT IN AFFORDABLE HOUSING FUND

This study attempts to explore factors that may attract institutional investors to invest in affordable housing funds in Malaysia. Six traits of investments were tested, namely fund structure and mandate, market return, social return, risk mitigation, governance and transparency, and government support for the investment. Based on the six determinants, the study uses a partial least square structural equation modeling (PLS-SEM) technique using data gathered from a survey involving employees of institutional investment firms in Malaysia. The study found three significant factors motivating institutional investors to invest in affordable housing fund, namely social return, government support, and governance and transparency. Overall, it was found that institutional investors do greatly consider social elements in their investment decisions. This will potentially open new avenues in fundraising efforts to build more affordable housing, hence providing an adequate supply of these homes for those in need.

Developing Enterprise Risk Management Disclosure Index using Factor Analysis

This study aims to explore the Enterprise Risk Management (ERM) disclosure by publicly listed firms in Malaysia. This study analyses a sample of 832 non-financial publicly listed firms in Malaysia between 2016-2019. This study used a more comprehensive index by embedding COSO-integrated ERM framework 2017 and ISO 31000. The data is analyzed using factor analysis to develop the ERM disclosure index. The results show that ERM disclosure consists of 4 main components: governance and culture, performance, objective setting, and reporting approach. Meanwhile, the level of ERM disclosure is still at a moderate level.

Is chair-CEO generational difference a substitute governance mechanism to debt financing?

PurposeThe purpose of this paper is to examine whether and how chair-chief executive officer (CEO) generational difference is related to debt financing.Design/methodology/approachThis paper adopts the pooled ordinary least squares and system generalized method of moments estimation procedures to analyze listed firms in Malaysia from 2013 to 2017.FindingsThe results reveal that chair-CEO generational difference is negatively associated with leverage. The evidence suggests that substantial age gaps between the chair and CEO precipitate cognitive conflicts, which lead to better monitoring and control. This results in better governance and less information asymmetry, causing firms to depend less on debt as a board monitoring mechanism. The findings provide support to the theory posited in this paper on the substitutability of chair-CEO generational difference and debt financing.Originality/valueThis is the first attempt to investigate the substitutability of chair-CEO generational difference and debt financing.

The Network Diversity Effect on The Performance of SME Construction Firms in Malaysia

The Network Diversity Effect on The Performance of SME Construction Firms in Malaysia

Heterogeneous political connections and corporate overinvestment: evidence from Malaysian firms

PurposeThis paper examines the relationship between heterogeneous political connections and corporate overinvestment.Design/methodology/approachBased on a comprehensive Malaysian dataset of 834 publicly listed companies from 2000 to 2022, the authors employed multivariate ordinary least squares regression to test the relationship.FindingsDespite different types of political connections, the findings demonstrate a positive relationship between political connections and corporate overinvestment. In particular, the association is more profound in government-linked companies (GLCs) but weaker in firms that developed political ties through family members of ruling elites. Further analysis reveals that the “helping hand” effect is only observed in GLCs and firms with politically connected directors and businessmen, whereas the “grabbing hand” effect is observed among firms connected through board, businessmen, and family ties. Moreover, the relationship is more persistent among firms with politically connected directors and businessmen around the regime change.Research limitations/implicationsRegardless of the types of political connections, the findings show that politically connected firms tend to engage in rent-seeking through political patronage networks and high levels of government interference in resource allocation. Therefore, a more sophisticated monitoring system should be developed within the political patronage networks to reduce the likelihood of different types of political-business collusion. In terms of research limitations, the research design does not consider the influence of financial constraints and management efficiency. Future research could explore these facets to comprehensively understand the dynamics between political connections and corporate investment decisions.Practical implicationsThe evidence informs market participants about the relationship between heterogeneous political connections and corporate overinvestment, reinforcing previous findings that crony capitalism, political patronage, agency problems, and weak governance are well-entrenched in Malaysia’s emerging economy. The government should acknowledge these concerns by enacting anti-corruption campaigns and promoting a fair business environment. In the meantime, policymakers might redesign regulations and revise corporate governance frameworks to substantially reduce the value of political connections, thereby diminishing the bargaining power of politicians.Social implicationsAs corporate investment efficiency has a considerable impact on firm value, investment decisions that enhance firm value will increase share price and maximise shareholder value. Conversely, firms may damage shareholder value if they overinvest or undertake projects that do not yield sufficient. Hence, the findings of this study may assist investors in making more informed judgements, particularly by understanding different types of business-government relations, as political connections are one of the determinants of corporate overinvestment.Originality/valueThis study reveals that the degree to which overinvestment issues manifest within firms is influenced by the nature of the political connections those firms possess. This indicates that politically connected firms should not be regarded as a homogenous group of firms.

The Effects of Marketing Orientations on The Performance of SME Construction Firms in Malaysia

The Effects of Marketing Orientations on The Performance of SME Construction Firms in Malaysia

Exploring The Relationship Between Iso 14001 Ems and Esg Performance of Malaysian Companies

Global environmental concerns have garnered significant attention in recent times. Concerns about encouraging more ecologically friendly production to lessen the effects of pollution have been raised by industrial operations that cause environmental pollution. The adoption of an environmental management system in Malaysian firms, however, has received little attention. This paper explores the mediating effect of Environmental, Social and Governance (ESG) framework on the relationship between ISO 14001 Environmental Management System (EMS) and ESG performance of Malaysian companies. Partial Least Squares Structural Equation Modeling (PLS-SEM) using SmartPLS 4 was employed to assess the relationship through a conceptual model developed for this purpose. A total of 86 completed responses were collected from the targeted respondents in Malaysia of different industries. With ESG framework as a mediator, ISO 14001 EMS has an insignificant relationship with ESG performance, and the R2 value of ESG performance is 0.243. When the ESG framework is removed, ISO 14001 EMS has a significant relationship with ESG performance, and the f-square value is 0.176. This effect size is considered medium. The results provide an empirical proof for Malaysian companies to adopt the ISO 14001 EMS as a business tool, with ESG framework as a mediator in order to enhance their ESG performance. The study’s conclusions highlight the implications of using ISO 14001 EMS as a tool for businesses in Malaysia to improve ESG performance.

Greening the hospitality industry: examining institutional influences and perceived benefits of EMS in Malaysian SME hotels

PurposeThe majority of Malaysian firms are small and medium-sized enterprises (SMEs), and the hospitality industry is no exception. However, a study on environmental management systems (EMS) reveals that relatively few studies have observed EMS implementation in small and medium-sized enterprises hotels (SMEHs). Hence, this study aims to determine the link between institutional influences and mediating effects of top managers' perceived benefits toward EMS implementation by Malaysian SMEHs.Design/methodology/approachThe results of a questionnaire survey of 252 SMEHs managerial-level professionals using Smart-PLS software provide some explanation for the marginal action taken by these SMEHs to improve their environmental performance.FindingsBased on the findings, five variables might stimulate the implementation of an EMS: regulatory influences, customer influences, competitor influences, employee influences and manager attributes influences.Research limitations/implicationsThis study significantly advances understanding of EMS and SMEHs, offering a replicable research framework applicable across industries and countries. Scholars can leverage the framework for further exploration, while managers should recognize institutional influences on EMS implementation.Originality/valueGiven that this study is one of the few that investigates the institutional influences and perceived benefits of EMS implementation, it may provide valuable information for future research on the hospitality industry and the SMEHs among researchers and practitioners.

Unveiling the Missing Link: Women in Stem Leadership – A Comprehensive Review

This paper extensively examined the representation of women in Science, Technology, Engineering, and Mathematics (STEM) within Malaysia, contextualized globally and historically. Existing research affirms the growing presence of women in the workforce (Gupta, 2020; National Academies of Sciences & Medicine, 2020), their progress in higher education (Manongsong & Ghosh, 2021; Vietze et al., 2022), their presence in professional and managerial roles (Burton et al., 2020; Evans & Maley, 2021), and their successful elevation to CEO positions (Dadanlar & Abebe, 2020). However, women continue to be significantly underrepresented in leadership positions, particularly within STEM firms (Hideg & Shen, 2019; National Academies of Sciences & Medicine, 2020). Young Malaysian women excel in both academic and extracurricular STEM activities from primary to university. Despite this gender equity achieved in STEM education, with 29% of tertiary engineering graduates and 57% of science degree holders being female, only 6% of women pursue careers as STEM professionals (Looi, 2022). Additionally, slightly over 4% of women hold leadership roles in technology firms in Malaysia (Amin & Tan, 2018). Using social constructivist and feminist theories, this analysis examines how societal and environmental factors affect girls’ performance in math and science. Educators and parents play a vital role in providing crucial support. This study also highlights a major research gap, particularly in understanding where qualified women in STEM go, especially within Malaysia.