Search results

1 – 10 of 14
Article
Publication date: 16 August 2021

Khairul Anuar Kamarudin, Wan Adibah Wan Ismail and Akmalia M. Ariff

This study aims to investigate whether auditor tenure has a significant influence on accounting quality and whether investor protection moderates the effect of auditor…

Abstract

Purpose

This study aims to investigate whether auditor tenure has a significant influence on accounting quality and whether investor protection moderates the effect of auditor tenure on accounting quality.

Design/methodology/approach

This study uses weighted least squares regression on a sample of 77,855 firm-year observations from 36 countries during the period 2010–2016. This study uses the absolute value of performance-matched discretionary accruals to measure financial reporting quality.

Findings

This study finds that a longer auditor tenure is associated with higher accounting quality, thus supporting the knowledge effect arguments. The results on the joint effect of investor protection and auditor tenure show evidence of the substitutive effect of investor protection, where the positive impact of auditor tenure on accounting quality is weaker in a high investor-protection environment.

Practical implications

These findings provide input for policy implications involving the auditing profession. Regulators may need to weigh the costs and benefits of mandatory audit rotation because country-level institutional factors influence auditing regulations and practices, as well as the auditors’ behaviors.

Originality/value

This study adds to the limited, albeit important, evidence on the joint effect of auditor tenure and country-level governance on accounting quality. The authors respond to the call by Brooks et al. (2017) for more evidence on the role of audits on financial reporting outcomes across various legal institutions for creating effective policies.

Details

Accounting Research Journal, vol. 35 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 26 July 2021

Khairul Anuar Kamarudin, Wan Adibah Wan Ismail, Iman Harymawan and Rohami Shafie

This study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.

Abstract

Purpose

This study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.

Design/methodology/approach

The study identified different types of PCON firms according to Wong and Hooy's (2018) classification, which divided political connections into government-linked companies (GLCs), boards of directors, business owners and family members of government leaders. The sample covered the period 2007–2016, for which earnings forecast data were obtained from the Institutional Brokers' Estimate System (IBES) database and financial data were extracted from Thomson Reuters Fundamentals. We deleted any market consensus estimates made by less than three analysts and/or firms with less than three years of analyst forecast information to control for the impact of individual analysts' personal attributes.

Findings

The study found that PCON firms were associated with lower analyst forecast accuracy and higher forecast dispersion. The effect was more salient in GLCs than in other PCON firms, either through families, business ties or boards of directors. Further analyses showed that PCON firms—in particular GLCs—were associated with more aggressive reporting of earnings and poorer quality of accruals, hence providing inadequate information for analysts to produce accurate and less dispersed earnings forecasts. The results were robust even after addressing endogeneity issues.

Research limitations/implications

This study found new evidence of the impact of different types of PCON firms in exacerbating information asymmetry, which was not addressed in prior studies.

Practical implications

This study has a significant practical implication for investors that they should be mindful of high information asymmetry in politically connected firms, particularly government-linked companies.

Originality/value

This is the first study to provide evidence of the impact of different types of PCON firms on analysts' earnings forecasts.

Details

Journal of Applied Accounting Research, vol. 22 no. 5
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 27 August 2021

Khairul Anuar Kamarudin, Akmalia M. Ariff and Wan Adibah Wan Ismail

This study aims to investigate whether board gender diversity is associated with corporate sustainability performance and whether industry-level product market competition…

Abstract

Purpose

This study aims to investigate whether board gender diversity is associated with corporate sustainability performance and whether industry-level product market competition moderates the effect of board gender diversity on corporate sustainability performance.

Design/methodology/approach

This study uses international data extracted from global ESG data set from Thomson Reuters (Refinitiv) database. Using data of 23,137 firm-year observations from 37 countries, the authors perform regression analyses to examine the hypotheses.

Findings

The findings show that firms with high board gender diversity exhibit high corporate sustainability performance. The authors also find firms in highly competitive industries to have low corporate sustainability performance. In highly competitive industries, the positive relationship between board gender diversity and corporate sustainability performance is weakened. The results are robust to various specification tests such as alternative measures for corporate sustainability performance, board gender diversity, product market competition and also the use of propensity score matching to address endogeneity issue. Overall, the results support the prediction that board diversity and product market competition play a substitutive role in influencing corporate sustainability performance.

Research limitations/implications

This study offers empirical evidence that the appointment of female directors is a useful way to improve a firm’s corporate sustainability performance, hence, providing significant benefits in terms of stakeholders’ values and corporate reputation.

Practical implications

This study provides useful insights to investors and policymakers that intense industry competition might mitigate the role of board governance, particularly board gender diversity, in enhancing corporate sustainability performance.

Originality/value

Using an international data set, where the observations operate in various market and institutional differences, this study is able to extricate the positive impact of board gender diversity and product market competition on corporate sustainability performance. This study corroborates evidence that sustainability strategy and initiatives are reflections of integrated factors, including corporate governance as internal driver and market forces faced by firms as external driver.

Details

Journal of Financial Reporting and Accounting, vol. 20 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 9 June 2020

Khairul Anuar Kamarudin, Akmalia Mohamad Ariff and Wan Adibah Wan Ismail

This paper aims to investigate the joint effect of product market competition (PMC) and institutional environment on accrual quality.

1762

Abstract

Purpose

This paper aims to investigate the joint effect of product market competition (PMC) and institutional environment on accrual quality.

Design/methodology/approach

The sample covers a large data set of 52,138 firm-year observations from 35 countries over the period of 2011-2015. Using the weighted least square regression, the study estimates PMC and institutional environment on accrual quality. The study measures PMC based on Herfindahl-Hirschman index, anti-director rights index (ADRI) based on the revised and updated La Porta et al.'s (1998) and accrual quality using the modified Dechow and Dichev (2002) model proposed by McNichols (2002). The study also uses a series of specification tests using alternative measures for each variable.

Findings

The study finds that highly intensified PMC relates to a lower quality of accruals. The results also show that accrual quality is better in countries with stronger institutional environment, specifically countries with higher ADRI, investor protection, judicial independence, protection of minority shareholders’ interests, protection of property rights, strength of the auditing and reporting standards, efficacy of corporate boards and corporate ethics. The findings suggest that institutional factors weaken the negative impact of PMC intensity on accrual quality, hence suggesting that institutional environment has a significant role to enhance accrual quality among firms in highly intensified industries.

Practical implications

The findings provide additional insights to policymakers and regulators on the importance of strong institutional and industry environment that can provide incentives and extra governance mechanisms besides the conventional firm-level corporate governance.

Originality/value

This study contributes in understanding the impact of intensity of PMC on accrual quality internationally and subsequently highlights the role of institutional environment as significant country-level governance in determining financial reporting quality, particularly accrual quality.

Details

Pacific Accounting Review, vol. 32 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 28 June 2022

Iman Harymawan, Mohammad Nasih, Nadia Klarita Rahayu, Khairul Anuar Kamarudin and Wan Adibah Wan Ismail

This study aims to examine the relationship between CEO busyness and financial reporting quality in a country which implements a two-tier board system.

Abstract

Purpose

This study aims to examine the relationship between CEO busyness and financial reporting quality in a country which implements a two-tier board system.

Design/methodology/approach

This study includes firms listed on the Indonesian Stock Exchange during the 2010–2018 period. This study employs an ordinary least squares regression, the propensity score matching procedure, and a Heckman two-stage regression in testing the hypothesis.

Findings

This study finds that firms with busy directors have a higher financial reporting quality, and these results are robust to a battery or sensitivity analysis. The additional analyses also find that a busy CEO is negatively associated with the firm's financial reporting quality with decreasing income.

Practical implications

This paper provides implications for policy-makers in the emerging market on devising policies on CEOs' appointments, especially when involving multiple directorships. Despite the general belief on the detrimental workload effects of busy directors, this study offers evidence supporting the opposite effect.

Originality/value

As many previous studies focused on the effect of director busyness on firm’s performance, this study focusses on the effect of CEO busyness on financial reporting quality. To the best of our knowledge, this study is the first to investigate this issue in an emerging market.

Details

Asian Review of Accounting, vol. 30 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 4 January 2022

Khairul Anuar Kamarudin, Ainul Islam, Ahsan Habib and Wan Adibah Wan Ismail

This paper aims to investigate the effect of auditor switching and lowballing on conditional conservatism, particularly how different types of auditor switching, namely…

Abstract

Purpose

This paper aims to investigate the effect of auditor switching and lowballing on conditional conservatism, particularly how different types of auditor switching, namely, upward, downward and lateral switching to/from Big 4 and industry specialists, affect earnings quality in the following selected Asian countries: Indonesia, Malaysia, the Philippines, South Korea and Thailand.

Design/methodology/approach

Using conditional conservatism as a proxy for earnings quality, this study hypothesises that upward switching from non-Big 4 to Big 4 auditors, or from non-specialist to specialist auditors, would result in high conditional conservatism, while downward switching would lead to low conditional conservatism. The study further tests whether lowballing provides a viable explanation for reduced earnings conservatism in firms that switch from Big 4 to non-Big 4 auditors, or from specialist to non-specialist auditors.

Findings

The analysis, on a sample of 28,073 firm-year observations from 2007 to 2016, shows that the decision to downgrade auditors leads to lower conditional conservatism in the year of switching, compared with other firms and the pre-switching year. The evidence further shows that, when firms downgrade their auditors, lowballing contributes to a decrease in conditional conservatism in the first year of audit switching. Further, this research finds that switching to specialist auditors will result in increased conditional conservatism, while switching from specialist auditors to non-specialist auditors will result in reduced conditional conservatism.

Practical implications

The findings of this study are useful to investors who are looking to diversify their investment portfolio in developing markets, as evidence about auditor switching and quality of financial reporting may be an important factor in their investment decisions. Downward auditor switches and lowballing could act as red flags to investors in the sense that these events could signal a decrease in conditional conservatism and, hence, quality of earnings.

Originality/value

This research offers new evidence to support the view that management decisions to switch to lower-quality auditors will force newly appointed auditors to acquiesce to clients’ demands for reporting low-quality earnings.

Details

Managerial Auditing Journal, vol. 37 no. 2
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 6 January 2005

Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Muhd Kamil Ibrahim

This paper examines issues related to the reporting of extraordinary items in the financial statements of Malaysian companies. The first issue concerns the change of…

Abstract

This paper examines issues related to the reporting of extraordinary items in the financial statements of Malaysian companies. The first issue concerns the change of accounting standards on extraordinary items, which has limited the scope of extraordinary items. It is found that there are significant changes on the incidence of reported extraordinary items during the period after the adoption of the new standard. The findings supported the argument that the new standards on extraordinary items had consequently reduce significantly these items from financial statements. This paper hypothesizes that extraordinary items classification choice is a means used by companies to smooth income. Two types of statistical tests performed have confirmed the proposition that the disclosure of extraordinary items is subject to this type of manipulation during the period before the adoption of the new standard. Although it is proved that the broad definition of extraordinary items allows companies to manipulate income, evidence gathered from multivariate regressions demonstrates that extraordinary items are of value‐relevance for investors in valuing a firm’s equity. Thus, investors take into account the extraordinary items even though it is disclosed “below the line”.

Details

Journal of Financial Reporting and Accounting, vol. 3 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 6 January 2005

Wan Adibah Wan Ismail, Raja Adzrin Raja Ahmad, Khairul Anuar Kamarudin and Rusliza Yahaya

This paper investigates twenty financial ratios to develop a local financial failures prediction model. The study covers the period of 1993‐2001. We used mean and…

Abstract

This paper investigates twenty financial ratios to develop a local financial failures prediction model. The study covers the period of 1993‐2001. We used mean and comparison of difference to the data set of fiveyears before the failures to identify the most superlative ratios. From these ratios, we developed two prediction models by using a logistic regression. The results indicae that these models are excellent in predicting financial failures a year before failure. Both models are able to predict financial failure two years before the failures with more than 90 per cent accuracy rate. It is hoped that this study, which is conducted using a recent data can contribute towards existing literatures on corporate failure prediction.

Details

Journal of Financial Reporting and Accounting, vol. 3 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 10 May 2013

Wan Adibah Wan Ismail, Khairul Anuar Kamarudin, Tony van Zijl and Keitha Dunstan

This study aims to investigate the differences in earnings quality of Malaysian companies after the adoption of IFRS‐based accounting standards named FRS.

7339

Abstract

Purpose

This study aims to investigate the differences in earnings quality of Malaysian companies after the adoption of IFRS‐based accounting standards named FRS.

Design/methodology/approach

It is hypothesize that under the new set of accounting standards, the quality of earnings reported by these companies is relatively higher. Specifically, the study tests whether the level of earnings management is significantly lower after the adoption of IFRS, and reported earnings is more value relevant during the IFRS period. This study uses a large sample of 4,010 observations over a three‐year period before and a three‐year period after the adoption of the new set of accounting standards.

Findings

The results show that IFRS adoption is associated with higher quality of reported earnings. It is found that earnings reported during the period after the adoption of IFRS is associated with lower earnings management and higher value relevant.

Originality/value

The results of this study contribute additional evidence to the literature on earnings quality and the impact of IFRS adoption. As most of the existing studies on earnings quality and IFRS have been conducted on data from the U.S and European countries, this study fills a gap in the existing literature by studying the effect of adoption of IFRS on earnings quality in an emerging market.

Details

Asian Review of Accounting, vol. 21 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 13 April 2015

Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Siti Rahayu Sarman

– The purpose of this study is to examine the quality of reported earnings in the corporate reports of Shariah-compliant companies listed on Bursa Malaysia.

2072

Abstract

Purpose

The purpose of this study is to examine the quality of reported earnings in the corporate reports of Shariah-compliant companies listed on Bursa Malaysia.

Design/methodology/approach

This study hypothesises that companies with Shariah compliance status have higher quality of earnings because of greater demand for and supply of high-quality financial reports. The quality of reported earnings is measured using the cross-sectional Dechow and Dichev (2002) accrual quality model. The study uses a balanced panel data of 3,048 observations from 508 companies during a six-year period of 2003-2008.

Findings

This paper finds robust evidence that Shariah-compliant companies have significantly higher earnings quality compared to other firms. The results provide support for the arguments that Shariah-compliant companies supply a higher quality of reported earnings to attract foreign investment, have greater demand for high-quality financial reporting because of their Shariah status and are subject to greater scrutiny by regulators and institutional investors.

Research limitations/implications

This study contributes to the existing literature on Islamic capital market, business ethics, firms’ governance and financial reporting quality. The study would give a better understanding on issues relating to earnings quality of Shariah-compliant companies and would be especially useful for financial statement users, including investment analysts.

Originality/value

This paper provides evidence on the quality of earnings in Shariah-compliant companies and offers new arguments that explain why such companies possess higher quality of earnings compared to their counterparts.

Details

Journal of Islamic Accounting and Business Research, vol. 6 no. 1
Type: Research Article
ISSN: 1759-0817

Keywords

1 – 10 of 14