TY  - JOUR
AB  - Purpose This purpose of this paper is to examine the implications of the Revised Malaysian Code on Corporate Governance (2007) toward the effectiveness of the board and audit committees in Malaysian manufacturing companies. Since the manufacturing firms are dominantly held by Chinese firms, this paper is extended to incorporate the implication of ethnicity on board and audit committees’ effectiveness.Design/methodology/approach Using a sample of 201 firms from fiscal year 2004-2009, the data set consists of a total of 1,206 firm-year observations. Analysis is carried out using correlation analysis, multiple and logistic regression analyses.Findings The findings reveal that board and audit committees’ effectiveness is positively associated with earnings management pre- and post-Revised Malaysian Code on Corporate Governance (2007). A higher number of ethnic members in the board are also positively associated with earnings management.Research limitations/implications This study is limited to some industries in the manufacturing sector due to the special characteristics of this sector and covers mostly large firms. The results may not therefore be applicable to small firms. Finally, the study does not consider possible interaction between the board and audit characteristics which may be significant in influencing earnings management.Practical implications The findings show that the corporate governance mechanism in Malaysian firms is currently inadequate in preventing earnings management and extra effort is needed to improve board governance.Originality/value This paper contributes to the current literature on the issues of corporate governance effectiveness and board ethnicity in the current economic and political structure in Malaysia.
VL  - 16
IS  - 4
SN  - 1472-0701
DO  - 10.1108/CG-06-2015-0085
UR  - https://doi.org/10.1108/CG-06-2015-0085
AU  - Wan Mohammad Wan Masliza
AU  - Wasiuzzaman Shaista
AU  - Nik Salleh Nik Mohamad Zaki
PY  - 2016
Y1  - 2016/01/01
TI  - Board and audit committee effectiveness, ethnic diversification and earnings management: a study of the Malaysian manufacturing sector
T2  - Corporate Governance
PB  - Emerald Group Publishing Limited
SP  - 726
EP  - 746
Y2  - 2024/04/25
ER  -