Total Asset Size Research Articles

Performance analysis of non-banking finance companies using two-stage data envelopment analysis

This paper analyses the performance of non-banking finance companies (NBFC) in the Indian context using data envelopment analysis (DEA). The underlying objective of this study is to fill the void in the domain of NBFC, although a lot of research has been done on the banking industry in the context of the application of DEA, but none on NBFCs. The paper takes the panel data of the last 5 years (2014–2018) to calculate super-efficiencies in the first stage and then regresses the same on exogenous factors in stage-2. Descriptive statistics are used to estimate the efficiency by carrying out the calculations using both the traditional models (OTE, PTE and SE) and super-efficiency model. A comparison is made by categorizing NBFC’s based on the size of total assets and using non-parametric statistic tests to find whether the efficiency scores are significantly different across different categories. The second stage DEA analysis uses Tobit regression to find the exogenous factors which affect the model significantly. Based on traditional models, the total number of efficient DMUs are 8 out of 43 while there are 15 after considering the super-efficiency algorithm. Malmquist Indices are used to study the productivity indices of NBFCs over the last 5 years, and it gives us a maximum productivity growth of 8.53%. It was noticed that there is a significant difference in the mean efficiency values of different sized NBFC’s which can be explained by the lack of standardization in the NBFC domain and the few companies which are listed on the stock market. The managers should not consider ROE as a significant indicator of efficiency and should instead focus on aspects such as ROA and income diversity. Through the Malmquist analysis, the managers can break down the productivity change into technical and efficiency shifts for further investigation.

A Study on Foreign Investment Strategy of Four Major Chinese Commercial Banks

본 연구의 목적은 중국 4대 상업은행의 해외투자여부, 해외투자의 지역선택, 해외투자의 성과에 영향을 주는 요인들에 관한 실증분석을 하고자 한다. 중국 상업은행의 해외직접투자 여부에 관한 가설에 대해서는 로지스틱모형을 이용하여 분석하였다. 추정한 결과 중국 상업은행의 해외투자 여부는 은행의 총자산수익률, 자산규모, 비이자 이익, 순이자 마진이 통계적으로 유의한 것으로 나타났다. 중국 상업은행 해외투자의 지역선택요인으로는 중국이 상대국에 대한 해외직접투자(FDI) 금액과, 파이낸스 센터 존재여부, 상대국의 1인당 GDP, 상대국과 지리적 거리가 중요한 변수로 나타났다. 해외직접투자 성과에 미치는 영향요인에서는 해외자산 대비 총자산의 비율과 자산시장 변동 상황, 영업이익경비율 등이 중요한 변수로 나나났다. 이러한 결과는 ‘일대일로’가 본격화되기 전인 2013년 이전에 실시된 유사한 선행 연구결과와 비교하여 중국의 주요 상업은행이 외국으로 진출할 때 어떠한 요인들이 중요하게 작용하는가를 설명하고 있어 향후 다른 중소 중국 은행의 해외 진출 시 의미 있는 정보를 제공할 수 있을 것으로 사료된다.The purpose of this study is to conduct an empirical analysis on the factors affecting the choice of foreign investment, the selection of regions of foreign investment, and the performance of foreign investment by the four major commercial banks in China. The hypothesis as to whether or not the Chinese commercial bank is invested in foreign direct investment was analyzed using the logistic model. As a result of the estimation, it was found that the total investment yield, asset size, non-interest income, and net interest margin of the Chinese commercial bank were statistically significant. As a regional selection factor of the Chinese commercial bank s foreign investment, China s foreign direct investment (FDI) amount, the existence of a finance center, GDP per capita of the other country, and geographical distance from the other country were important variables. The factors affecting performance after foreign direct investment were the important factors such as the ratio of total assets to overseas assets, the situation of asset market fluctuations, and operating profit ratio. These results explain what factors are important when major commercial banks enter foreign countries compared to similar prior studies conducted prior to 2013, before One Belt One Road began in earnest. It is thought that it can provide meaningful information regarding the Chinese banks entering overseas.

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This paper examined the impact of liquidity, leverage, and total assets size of the bank on profitability. This study employed bank scope data of all 28 commercial banks operating in Nepal during the period of 2010/11 – 2016/17. Altogether, the168 observations were used in the study. Three ordinary-least-squares models were applied to analyze the impact of liquidity, leverage, and the total size on the bank’s profitability. The first regression model reveals that the higher loan to deposit ratio (low level of liquidity) was observed to have the negative effect on the bank’s ROA, ROE, and NIM; however, ROE and NIM were statistically insignificant. The result of the second regression model shows that higher equity to assets ratio (lower leverage) positively affected two profitability measures, ROA and NIM, and was statistically significant—but was negatively related to ROE and statistically insignificant. The result of the final regression model reveals that the higher bank size appeared favorable to the Nepalese commercial banks and was found to have positive effects on all three profitability measures: ROA, ROE, and NIM. The results of the study could help bankers and policymakers to take an effective action in order to improve banks’ profitability.

A Study on Determinants of Performance of Contract Farming by Agricultural Cooperatives

Purpose - This study examines the factors that influence the performance of contract farming by agricultural cooperatives from the agency theory and resource-based view of the firm. Design/methodology/approach - This study collected 1,090 data related to a sample of contract information between agricultural cooperatives and producers from national agricultural cooperatives federation. In order to examine the performance of contract farming, we use the multiple regression analysis. Findings - Incentives may reduce agency problems by increasing producers’ motivation and discouraging their opportunistic behavior. Total asset size and education expenses function like resources that lessen the risks coming from environment uncertainty, and also facilitate the contract farming between producers and agricultural cooperatives. Research implications or Originality - By analyzing the factors that influence on the performance of contract farming between producers and agricultural cooperatives, we propose that incentives, and resources may improve the performance of contract farming between agricultural cooperatives and producers. Overall, the contract farming can co-create the economic efficiency and effectiveness while minimizing risks and uncertainty.

Insurance Sector Development and Foreign Direct Investment in Nigeria

Aims: The study examined the impact of insurance sector development on foreign direct investment in Nigeria.
 Study Design: The ex-post facto research design was employed to observe the study components in retrospect. Secondary data spanning 1996 to 2017 was sourced and collated from the World Development Indicators, Central Bank of Nigeria statistical bulletin and National Insurance Commission annual balance sheets.
 Place and Duration of Study: Department of Banking and Finance, Niger Delta University, Wilberforce Island, Bayelsa State, Nigeria. The study was carried out between November 2019 to January 2020.
 Methodology: The ex-post facto research design was employed to observe the study components in retrospect. Secondary data spanning 1996 to 2017 was sourced and collated from the World Development Indicators, Central Bank of Nigeria statistical bulletin and National Insurance Commission annual balance sheets. The time series data was estimated using the least square technique.
 Results: The results indicates that; the total asset size of the insurance sector exerts a negative and statistically insignificant impact on foreign direct investment inflow to Nigeria, total insurance business investment exerts a positive and statistically insignificant impact on foreign direct investment inflow to Nigeria and finally, total insurance premium exerts a negative and statistically significant impact on foreign direct investment inflow to Nigeria.
 Conclusion: The study concludes that insurance sector development does not attract foreign investment inflow to Nigeria. The study recommends that the insurance sector should be revamped in order to absorb risk and uncertainty and be a vehicle for risk transfer and minimization. A policy of restructuring would help instil public confidence, boost insurance policy sales, increase insurance premium and invariably increase the availability of investible funds to boost economic activity. The study suggests that these would help attract foreign direct investment to meet domestic funding needs of Nigeria.

Bankacılık Sektöründe Sermaye Yeterlilik Rasyosunu Belirleyen Faktörlerin Analizi

Capital adequacy ratio is considered as an important indicator in the risk and profitability management of the banks, which are considered as the most fundamental element of the financial system due to their intermediation activities. Turkey has made many regulations for banks' capital structure after the experienced financial crisis. Since 2006, it is aimed to strengthen the banking system with a minimum capital adequacy ratio (12%) above the standard ratio of 8% set by the Basel criteria. In this sense, it is important to identify the factors that affect the capital adequacy ratio, which is considered as an important tool of risk and profitability management The commercial banks operating in Turkey and whose complete financial data were available were used in the study and panel data analysis was conducted. According to the findings, it was determined that there is a significant relationship between the capital adequacy ratio and the banks' total asset size, deposit/total asset ratio, loan/total asset ratio, interest margin and non-performing loan/total loan ratios.

AN EXPLORATORY FACTOR ANALYSIS ON VARIABLES AFFECTING THE PROFITABILITY OF SRI LANKAN LOCAL COMMERCIAL BANKS

The main purpose of this study is to investigate the relationship between bank-specific factors and the profitability of local commercial banks in Sri Lanka. Thus, finding the main internal and external characteristics for achieving higher profitability. In this research, Exploratory Factor Analysis (EFA) is used as an alternative approach to examine the relationships between bank-specific characteristics of bank’s profitability for a sample of 11 major Sri Lankan local banks during the 12 years period from 2006 to 2017. The findings reveal that assets base and size of branch network are the main determinants of banks’ profitability, by showing a significant relationship with all measures of profitability. Net profits of banks show a significant relationship with size of branch networks and total assets, but insignificant with deposit interest ratio. However, loan interest ratio and deposit interest ratio together have a significant effect on net interest margin thus leading an impact on banks’ profitability. Article visualizations:

On the Nexus of Credit Risk Management and Bank Performance: A Dynamic Panel Testimony from Some Selected Commercial Banks in China

This study empirically examines the liaison amid credit risk management and bank performance in a multivariate framework using bank size, non-performing loans, real GDP, net income, inflation and return of total assets to loans as indicators of credit risk and return of assets as a proxy of bank performance for some selected commercial banks in China from 2006-2017. With the application of panel econometric approaches that account for the issues of cross-sectional dependence and heterogeneity, results from the P-Y homogeneity test, Pesaran CDLM test, CIPS panel unit root test, Pedroni and Durbin-Hausman panel cointegration, the AMG estimator and the DH panel Granger causality test show that: 1) the panel time series data are heterogeneous and cross-sectionally dependent; 2) analyzed variables are integrated are of the same order (I(1)); 3) there exists a structural long-run relationship amongst the analyzed variables; 4) non-performing loan has a mitigating impact on bank performance, whereas net income and bank size have positive effect on bank performance. Real GDP and inflation impact negatively on bank performance but insignificant whilst the ratio of total assets to loans on the other hand also has a statically insignificant but positive effect on bank performance; 5) a variety of causal relationships are identified amongst analyzed variables; 6) conclusions as well as policy implications are efficient and robust since this study utilizes econometric techniques addresses the issues of heterogeneity and cross-sectional dependence.

Revenue diversification and total assets in commercial banks: Evidence from selected ASEAN countries

This study reveals the impact of total asset size upon revenue diversification in commercial banks in five of the countries in the Association of Southeast Asian Nations (ASEAN) countries – Indonesia, Malaysia, the Philippines, Thailand, and Vietnam – during the period between 2005 and 2015. By applying the General Moment Method (the GMM) to the unbalanced panel data, this research has determined the impact of the total asset size, as well as the impact of a number of other factors, such as non-performing loans, net interest margin rates, owner equity, business cycles, and the years of the financial crisis. The empirical results show the positive impacts of total asset size, non-performing loans, and the years of the financial crisis upon the levels of revenue diversification. However, other variables are negatively correlated with revenue diversification, such as net interest margin rates, owner equity, and business cycles.

Are publicly funded Czech incubators effective? The comparison of performance of supported and non-supported firms

PurposeEven in established economies, empirical studies on the relationship between business incubation and firm performance do not show unequivocally positive results. The purpose of this paper is to contribute to this debate based on the empirical evidence from the under-researched Central and Eastern European region in which no similar study has been conducted before. Due to the shorter experience with the management of business incubators and less developed institutions, business incubators may not be so effective in supporting their tenants in this region.Design/methodology/approachThe authors utilise firm-level data from incubated Czech enterprises (n=205) founded after 2003 and compare them with those that have not received support from incubators. The authors implement three matching techniques to pair incubated and non-incubated companies. The outcome variables measured sales, price-cost margin, assets turnover, value added, size of total assets and size of personnel costs.FindingsCompared to the control group, incubated firms reported on average lower values of the above-mentioned indicators. Presented study shows that Czech incubators have not been successful in supporting growth of incubated firms.Practical implicationsThe study suggests that there is a clear room for improvements. Incubators should improve in attracting and selecting high potentials and in providing more effective support focussed on tenants’ growth, whereas policymakers should exercise stricter control regarding the money spent and effectiveness of incubators.Originality/valueThe empirical analysis was conducted based on the research gap in the studies related to the impact of business incubation in the under-researched Central and Eastern European region. It also shows that positive results from similar studies done in established economies cannot be taken for granted as they depend on the quality of institutions in a particular country.

Crisi delle PMI e strumenti di warning. Un test di verifica nel settore manifatturiero

Score-based models play an important role for predicting the failure of non-listed SME’s within a few years before bankruptcy, and the the reason of their success is in the fact that they are easy to understand and use easily obtainable data from both balance sheets and statements. This paper ascertains if two of such warning tools, one originally developed for U.S. firms (Z’-Score) while the other one is an adaptation of the latter to the peculiarities of the socio-economic Italian enviroment (BCS), are effectively reliable in measuring the default potential of industrial businesses in Italy. First, we have analyzed the theoretical and practical characteristics of the two models and we highlight some of its potential shortcomings. Second, we have examined a sample of 200 industrial SME’s, of which 100 companies have been subjected in the period 2005-2015 in bankruptcy proceedings because of a default, whereas the remaining 100 companies, which have been selected based on same core business, year of data collection and a comparable size of total assets, did not go bankruptcy. The models were tested by verifying, yesterday for today, whether the future health status of the businesses in the sample, and the impending business failures specifically, could have been predicted up to three years earlier and with reasonable precision using the examined models. We found that the models still work effectively and perform well in predicting failures of Italian SME’s, provided that some critical points illustrated in this study are taken into account.

Research on Non-Performing Loans Ratio’s Controlling: Evidence from 13 Commercial Banks

The People’s Bank of China in 2013 released a report revealing that the balance of non-performing loans of Chinese banking financial institutions had rebounded for the first time since 2005. In this situation, establishing early warning models – to recognize the factors that influence non-performing loans, and take effective measures to prevent defaults and control the banks’ credit assets – has become a major new issue. This paper examines the determinants of the non-performing loans (NPL) ratio in the Chinese banking sector from 2005 to 2011 using a panel data model. This model incorporates a new factor called distance to default (DD). The results show that the rates of change of total asset size, commercial loan ratio, and distance to default correlate negatively with NPL. There are positive correlations between capital return ratio, net interest margin, and single-lag NPL with NPL. However, there is no significant correlation between the proportion of shareholders’ equity, or the proportion of total loans, and NPL. In conclusion, this study suggests that regulators should consider and pay more attention to all these banks’ operational indicators to control NPL.

Impact of Firm Specific Variables on Dividend Payout of Nepalese Banks

This study examines the impact of firm specific variables on dividend payout of Nepalese banks. For the purpose of this study, the secondary data has been used. The total dividend per share and cash dividend per share are selected as dependent variables. Return on assets, return on equity, earning per share, price earnings ratio, cash flow, total debt to total equity, and size of total assets are independent variables. The data are collected from the Banking and Financial Statistics, Bank Supervision Report published by Nepal Rastra bank and annual reports of selected banks. The regression models are applied to test the significance and importance of dividend payout of commercial and development banks. Using data of 13 commercial banks and 8 national level development bank for the period of 2007/08-2013/14, the result shows that profitability and size are the major determinants of dividend payout of commercial and development banks in Nepal. Earnings per share, return on assets, return on equity, size and liquidity have significant positive impact on dividend per share. Profitability, size and liquidity are found to have positive significant effect on cash dividend per share while leverage has negative effect on cash dividend per share.

“Vaguely Right or Precisely Wrong?”: Making Probabilistic Cost, Time, and Performance Estimates for Bluefield Appraisal

Summary We conducted a practical case study that aims at estimating the shapes and parameters of probability distributions for key cost, time, and activity performance inputs required by a risk, resource, and value simulator to conduct a stochastic valuation of a new exploration asset. We analyzed a sample of 73 shallow offshore fields in Australia retrieved from a global field-by-field database that includes reserves, production profiles, financials, valuation, breakeven prices, ownership, and other key metrics for global oil and gas fields, discoveries, and exploration licenses. The reviewed facilities concepts include 40 steel platforms, 2 concrete gravity-based developments, 10 projects with extended-reach drilling, 4 floating production, storage, and offloading (FPSO) vessels, and 17 subsea tiebacks. The aggregate capital expenditure (Capex) of projects in the sample during 1965–2015 is USD 99.1 billion (in nominal terms), which is commensurate with the total asset size of the Australian offshore petroleum industry. We estimate probability distributions for all full-cycle parameters required to generate Monte Carlo Capex, operating expenditure (Opex), and production profiles. In particular, these include facility Capex per unit peak, development-phase duration and scheduling rules, drilling expenditures per barrel of oil equivalent (BOE), cost of exploration and appraisal wells, Opex/Capex ratio, abandonment cost ratio, fraction of hydrocarbons produced yearly at plateau, fraction of hydrocarbons remaining at end of plateau, terminal production rate, and fraction predrilled wells. Most of the aforementioned were found to be log-normally distributed. The paper illustrates a practical application of a simple, yet robust, work flow relying on real industry data to assess the value, risks, and uncertainties of an exploration prospect. It can be seamlessly extended to other basins because of a rich coverage of the online field-analogs database.

Capital Structure and Corporate Performance: A Case of Nepal

The objective of this study is to analyze the capital structure factors affecting the financial performance of commercial banks in Nepal. This study is based on pooled cross sectional data analysis of 19 commercial banks listed in NEPSE for the period of 2007/8-2013/2014 with 133 observations. The sample includes all sorts of commercial banks operating in Nepal like public sector, joint venture and privately owned banks. The performance measures in terms of return on assets, earnings per share and net interest margin are selected as dependent variables. Total debt to total assets ratio, long term debt to total debt ratio, short term debt to total debt ratio, size and credit risk are taken as independent variables.The study revealed that total debt to total assets ratio, long term debt to total assets ratio, short term debt to total assets ratio and size are negatively related to returns on assets whereas credit risk is positively related to returns on assets. It indicates that higher the debt in capital mix lower would be return on assets. Similarly, increase in credit risk leads to an increase in returns on assets. The result also shows that the total debt to total assets ratio, long term debt to total assets ratio and short term debt to total assets ratio are negatively related to earning per share whereas size and credit risk is positively related to earnings per share which reveals that increase in debt decreases in earnings per share. Likewise, total debt to total assets ratio, long term debt to total assets ratio and short term debt to total assets ratio are negatively related to net interest margin which indicates higher the debt in capital mix lower would be net interest margin. The result shows that there is positive relationship between bank size and net interest margin which reveals that increase in bank size will increase the net interest margin. The beta coefficients for total debt to total assets ratio, long term debt to total assets ratio and short term debt to total assets ratio were negative, while beta coefficients were positive for size and credit risk. However, the coefficients were significant for size and credit risk only at 5 percent level of significance. Thus, this study concludes that size and credit risk are the major factors affecting the financial performance of commercial banks in the context of Nepal.

Efektywność działania wybranych banków spółdzielczych (na przykładzie województwa mazowieckiego)

Celem pracy było określenie poziomu efektywności wybranych banków spółdzielczych z województwa mazowieckiego. Efektywność wyrażono wskaźnikami ROA i ROE. Badania przeprowadzono na 30 bankach spółdzielczych wybranych losowo. Z uzyskanych danych wynika, że wskaźnik ROA w badanych BS-ach w latach 2009–2010 był wyższy niż w sektorze banków komercyjnych i w sektorze banków spółdzielczych, a w latach 2011–2012 sytuacja była odwrotna. Z kolei wskaźnik ROE we wszystkich analizowanych latach w badanych bankach spółdzielczych był wyższy niż w sektorze banków komercyjnych i w sektorze banków spółdzielczych. Wielkość aktywów ogółem i kapitałów własnych banków spółdzielczych nie miała statystycznie istotnego wpływu na poziom ich efektywności ROA i ROE, co świadczy, że hipotezę pierwszą odrzucamy. Rodzaj zrzeszenia banków spółdzielczych nie wpływał statystycznie istotnie na poziom ich efektywności ROA i ROE, co oznacza, że hipotezę drugą odrzucamy.

Cost of Funds of Non-Bank Financial Institutions in Bangladesh: Internal Factors Analysis

Non-Bank Financial Institutions (NBFIs) are increasingly being recognized as complementary to the banking system and perform a diversified range of functions through offering various financial services to individual, corporate and institutional clients. Nevertheless, the cost of funds of NBFIs is significantly higher than the banks as banks are the prime sources of funds for them. On the other hand, the availability of funds from banks is becoming inadequate day by day due to the involvement of banks with some similar functions of NBFIs. The study intended to identify the current scenario of the cost of funds of different groups of NBFIs and to find out the causal relationship of the internal factors with the cost of funds of NBFIs. The study finds that NBFIs established before 1990 shows higher equity contribution and total asset size which shows their ability to generate funds at a low cost for the reputation and public confidence. On the other hand, due to the high equity contribution, large asset size and high EPS of the group of joint venture NBFIs compared to local NBFIs are able to raise relatively low cost funds. From the multiple regression analysis current study finds that only the variables of age and earning per share are statistically significant at 5% level. The other two factors, equity contribution and interest earning asset conform the theoretical sign although they are not statistically significant. The other variable, size of business that is measured by total asset, neither conform the expected sign nor is statistically significant.

Regulatory framework and deposit – investment guarantee fund in Greece

Purpose – The purpose of this paper is to examine the current regulatory framework of Greek Deposit and Investment Guarantee Fund, trying to show solutions for strengthening it. Design/methodology/approach – This paper aims to investigate the deposit and investment guarantee fund in Greece by identifying new problems and developing solutions. Findings – The main finding is that the deposit and investment guarantee fund contributes to the stability of the Greek banking sector and also offers practical solutions to strengthen it. Greek Deposit and Investment Guarantee Fund has an important feature, which is the speed of a decision about a bank failure resolution (in five working days), but needs immediately strengthening and increasing its funds to cope with the resolution of non-viable banks and undertaking for costs. There should be an appropriate ratio between the size of total assets (especially cash and cash equivalents) of Greek Deposit and Investment Guarantee Fund and the amount of total guaranteed deposits, which is now below 2 per cent. Regulatory framework needs revising and fees must be increased if its funds fall below a certain level of coverage of guaranteed deposits. Also, a guarantee premium, not only a flat rate premium, should be implemented for all banks. An additional risk-adjusted premium varying according to Greek banks’ risks of their portfolios would be better to increase funds of deposit guarantee fund and reduce moral hazard of bank manager by increasing costs. They must ensure an adequate diversification of re-deposits of Greek Deposit and Investment Guarantee Fund funds and must limit and avoid a conflict of interest of its board membership for individuals who are actively involved in Greek commercial banks by implementing framework and rules about it. Also, as a consequence of obeying the regulatory framework, it is necessary to include as board members of Greek Deposit and Investment Guarantee Fund only those banks that are subject to strong prudential supervision and regulation. Practical implications – As a result of research, changes are necessary to immediately be made to cope with current financial crises and problems of Greek banking sector. Originality/value – The originality of this paper is that it is the first description of the Greek Deposit and Investment Guarantee Fund and its results are important for economists, politicians and international community, who evaluate the regulatory framework of Greek Deposit and Investment Guarantee Fund, especially at the current time when the Greek economy and the Greek banking sector are in a very weak fiscal position.

Factors Affecting Liquidity Risk in the System of Vietnamese Commercial Banks

The research tries to identify causes of liquidity risk for the system of Vietnamese commercial banks. Data for the research are collected from annual reports in the years 2002-2011 by 27 Vietnamese commercial banks. The liquidity risk examined in the research is financing gap; and independent variables, or factors affecting the liquidity risk, are divided into two groups: internal and external ones. The estimated results of the models show that the liquidity risk among banks depends not only on internal factors, such as total asset size, liquidity reserve, inter-bank loan, and ratio of equity to capital, but also on external ones, or macroeconomic factors, such as growth rate, inflation, and especially effects of policy lags.

Audit Market Concentration and Auditor's Industry Specialization

Abstract Past studies have shown that auditor's industry specialization exists in the USA (Rhode, Whitsell & Kelsey, 1974) and Australia (Craswell & Taylor, 1991). In Malaysia, however, according to Takiah, Ruhanita & Aini (2000), none of the Big 6 audit firms in Malaysia specializes in any one particular industry. Their empirical analysis covers a period from the year 1991 up till the year 1996 which is before the merger of the audit firms in 2002, the Enron case in 2001 and also the 1997 economic downturn. Thus, this study focuses on the financial statements that are prepared for the financial year-end 2003. It seeks to find out the impact of those events towards the audit market concentration and auditor's industry specialization from the Malaysian audit perspective. Pertinent point that could be highlighted are; the Big 4 audit firms in Malaysia dominate about 72% of the market audit share in the year 2003 where majority of audit clients are in the medium audit fee, small revenue and in the medium total assets size categories. Further, in term of auditor's industry specialization, none of the Big 4 audit firms specializes in one particular industry, unlike those audit firms that are in the USA and Australia. Since auditors that are specialized in a particular industry would assist in reducing the likelihood of the issuance of restatements affecting core operating accounts (Romanus, Maher & Fleming, 2008), then the implication of this study would be for the authority to think of a possible solution in encouraging the auditors in Malaysia to be specialized in a particular industry.