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PurposeThe purpose of this paper is to investigate the effect of audit committee independence, board ethnicity and family ownership on earnings management in Malaysia.Design/methodology/approachThe effect of audit committee independence, board ethnicity and family ownership on corporate governance is investigated via 1,206 firm-year observations between the fiscal years of 2004 and 2009 of Bursa Malaysia listed firms. Panel data regression analysis is used to analyze the relationship.FindingsThe findings of this study fail to associate the role of audit committee independence as proposed under RMCCG (2007) in curtailing earnings management activities, thus supporting the findings on power distance scores that power granted to the top management may result in less effective independent directors. Nonetheless, in support of the alignment effect theory, family ownership is found to reduce earnings management activities. The findings show that corporate governance is more effective in developing country family firms due to their long history of family reputation and the importance of institutional culture factors.Research limitations/implicationsThis study focuses on board ethnicity, family ownership and its influence on earnings management.Originality/valueThis study offers insights into the importance of family institutional structures on corporate governance reforms in Malaysia as Malaysian family firms are mostly traditional firms that have built their reputation and strength in the industry for many generations.

Purpose The purpose of this study is to empirically assess the relationship between the dimensions of creditworthiness and access to finance of small and medium-sized enterprises (SMEs) in Malaysia, with creditworthiness as the mediating variable. The lack of empirical research on the relationship between creditworthiness and access to finance forms the motivation of this study. Design/methodology/approach Questionnaires covering various characteristics of the firms, their access to finance and creditworthiness were distributed to a total of 456 SMEs in the Kuala Lumpur and Selangor region for this purpose. A total of 158 responses were returned, of which 145 were usable responses and the relationships are tested using SEM-PLS. Findings This study finds that an SME and its owner’s character have significant influences on access to finance. An SME’s condition and its ability to provide high quality collateral are found to be highly significant in influencing its access to finance. Capacity is significant but its significance is low, while capital is insignificant. Creditworthiness has a significant positive influence on access to finance. Originality/value This study contributes to the important yet under-researched issue of access to finance for SMEs. It highlights the issue of character of applicant as an important dimension of creditworthiness that can significantly influence access to finance for SMEs.

This study aims to investigate the effect of board gender diversity on the transparency of environmental, social, and governance (ESG) disclosures in an emerging market such as Malaysia. Dataset is comprised of 568 firm‐year observations from 78 firms listed on the Bursa Malaysia. Ordinary least squares regression analysis of the data shows that ESG disclosure scores are significantly improved with the increasing presence of women directors on corporate boards. However, when the individual components are studied, the impact of board gender diversity varies. This study contributes to the limited but growing literature on ESG reporting quality and board gender diversity especially in emerging economies.

The objective of this research is to investigate the effects of firms’ ESG (Environmental, Social and Governance) disclosures on firm performance, moderated by firm competitive advantage. The sample of the data is 3966 firm-year observations from year 2012–2017 of 661 firms listed in the Bursa Malaysia. To improve the robustness of our analysis we adopt clustering techniques in our regression analysis. The findings of this research indicate that ESG disclosure improves firm performance even after controlling for competitive advantage. We also find consistent evidence that an increase in ESG disclosure by one unit will increase firm performance by approximately 4 percent in Malaysia. The implication of this research is the need to re-examine the level of ESG disclosure and the financing incentive for firms with high ESG disclosure scores as high scores of ESG are associated with higher competitive advantage. Further, policymakers can enhance regulatory frameworks by incorporating ESG across various investment activities and value creation initiatives.

PurposeThe purpose of this paper is to examine the various factors that influence a small and medium enterprise’s (SME) decision to apply for bank loans.Design/methodology/approachData from survey responses of 145 SMEs from Selangor and the Federal Territory of Kuala Lumpur are used for this purpose. Exploratory factor analysis, logistic regression and SEM-PLS are used to analyze the data.FindingsThe findings from the survey show that an SME’s financial performance, its access to finance and its legal form play a significant positive role in its decision to apply for debt financing. Private limited SMEs that perform well and are able to access to various financing options are more likely to apply for financing. However, there is also evidence of a significant negative influence of credit history on the decision to apply for financing, as SMEs with a poor credit history are more likely to apply for financing. The age of an SME has weak influence while its size is found to be insignificant in influencing its decision to apply for financing.Originality/valueThe results imply the role of financial market imperfections such as adverse selection and information asymmetry in defining the SME’s demand for debt financing. The study contributes to a deeper understanding of the debt financing decisions of SMEs.

This study focuses on the influence of the Hajj pilgrimage on the Saudi stock market. Stock returns data of the Tadawul All-Shares Index (TASI) and several sector indices from January 2010 to August 2014 are used to examine the impact of the Hajj pilgrimage on the return and volatility of the stock indices. Using the ARMA(p,q)-GARCH(1,1) model, the results show that while the Hajj period has an insignificant negative influence on the mean return of the TASI and the sector indices, a significant increase in volatility is observed for the TASI and all the sector indices, except for the retail, agriculture and food and the petrochemical sectors. The increase in volatility is contrary to what has been found in prior studies but is consistent with the expectation that reduced participation due to religious beliefs and sentiments increases volatility of returns. This study contributes to the scant literature on cultural/religious anomalies in Islamic stock markets. The result being contrary to prior studies indicate that a deeper understanding of this stock market anomaly and the sentiments behind it is required.

This study investigates the influence of audit committee characteristics on the likelihood of financial restatements by firms in Malaysia. Annual reports of 350 firms that have restated their finan...

This study focuses on the issue of religious anomalies, particularly the Hajj effect, influencing returns and volatility of the Saudi stock market (also known as the Tadawul All-Share Index). Using daily prices and trading volume of the index for a period of 9 years and the ARMA(1,1)–GARCH(1,1) model, it is found that returns are lower and volatility is higher during the Hajj period, although the effect is significant only for the volatility and not the returns.

Purpose The ineffectiveness of external governance mechanisms (laws and regulations) designed to curb insider trading in Malaysia leads this study to focus on the role of internal governance of firms in helping to reduce insider trading incidences. The purpose of this paper is to investigate the influence on institutional shareholders on insider trading activity. Design/methodology/approach The study uses data collected from a sample of 115 firms listed on the Bursa Malaysia over a five-year period (from year 2010 to 2014). Ordinary least squares technique is used to achieve the objective of this study. Findings The findings of this study points toward asymmetric information as a motivator for insider trading activity. Unlike previous studies which find the presence of institutional investors helping to reduce insider trading, this study finds results to the contrary. Originality/value This study focuses on the influence of institutional shareholdings on insider trading. The results provide more insight into the effectiveness of the role of institutions in curbing insider trading and suggest a closer monitoring of institutional shareholders.

Purpose – The vast amount of information available via online social networks (OSN) makes it a very good avenue for understanding human behavior. One of the human characteristics of interest to financial practitioners is an individual’s financial risk tolerance. The purpose of this paper is to look at the relationship between an individual’s OSN behavior and his/her financial risk tolerance. Design/methodology/approach – The study uses data collected from a sample of 220 university students and the backward variables selection ordinary least squares regression analysis technique to achieve its objective. Findings – The results of the study find that the frequency of logging on to social network sites indicates an individual who has higher financial risk tolerance. Additionally, the increasing use of social networks for social connection is found to be associated with lower financial risk tolerance. The results are mostly consistent when the sample is split based on prior financial knowledge. Originality/value – To the authors’ knowledge this is the first study which documents the possibility of understanding an individual’s financial risk tolerance via his/her social network activity. This provides investment/financial consultants with more avenues for gathering information in order to understand their current or potential clients hence providing better services.

Purpose– The purpose of this paper is to investigate the effects of family ownership on dividend payout from the perspective of agency costs in Malaysia.Design/methodology/approach– Annual financial, board and family ownership data of 160 firms listed on the Bursa Malaysia are collected for the period 2005-2010. Analyses are carried out using descriptive statistics,χ2 tests, Tobit regression and three-stage least square regression analysis.Findings– The empirical results suggest that family share ownership at the dispersed level from between 0 to 5 percent is negatively associated with dividend payout and positively associated from the 5 to 33 percent level with dividend payout. Consistent with the extant literature, the observed relationship between family share ownership and dividend payout is stronger in firms with smaller total assets (size), low debt and low-growth opportunities. Further examination of investment decisions lends support to arguments which attribute higher agency costs as a result of family ownerships.Research limitations/implications– The observed results at the different family ownership levels are attributed to the possible expropriation in family-owned firms and accordingly, to the proportional pressure by minority and other shareholders for dividend payout.Practical implications– For policy makers, findings from this study could serve to justify initiatives to further strengthen the institutional and regulatory architectures that would enhance the power of minority and other shareholders of public listed firms in Malaysia.Originality/value– This study contributes to the growing literature on dividend policy and family firms. Particularly, it provides further understanding of the effect of family ownership on dividend policy.

Purpose– The purpose of this paper is to measure the influence of six university qualities, namely academic quality, academic staff quality, management quality, industrial linkage quality and facilities’ quality, on students’ total experience (STE) and emotional attachment.Design/methodology/approach– Judgmental sampling is used to collect data from a sample of 489 undergraduate students of a private higher academic institution. The data are then analyzed using structural equation modeling.Findings– This study finds that only management quality forms a significant direct relationship with emotional attachment, whereas facility quality and industrial linkage form a significant relationship with emotional attachment only when mediated with STE.Originality/value– The results provide important findings to researchers and management of higher education institutions for future research directions.

Purpose – The purpose of this paper is to examine the relationship between working capital efficiency and firm value and the influence of financing constraints on this relationship. Design/methodology/approach – Data from 192 firms spanning a period of ten years (1999-2008) are used for this purpose and analyzed using the ordinary least squares regression technique. Findings – The study finds that improvements in working capital efficiency through reduction in working capital investment results in higher firm value. However, this relationship is influenced by the financing constraints faced by a firm. For financially constrained firms, working capital efficiency significantly increases firm value but it is found to be insignificant for unconstrained firms. Originality/value – To the author’s knowledge, this is the first study on the value of working capital in Malaysia or in any emerging market. Most studies on working capital valuation concentrate on developed countries and that too are only a handful. Hence this study contributes to the scarce literature on the valuation of working capital. This study also uses the model by Fama and French (1998) to evaluate the relationship between working capital and firm value, which has hardly been used in studies on working capital valuation.

Purpose – The purpose of this paper is to understand the motives behind the levels of cash holdings and the theory that may be able to explain why these firms hold so much cash. Design/methodology/approach – Annual financial data and stock prices of 192 firms from six different sectors on the Bursa Malaysia are collected for the period 2000-2007. Analysis using the non-parametric Kruskal–Wallis test is carried out to analyze industrial and time differences in cash holdings. The ordinary least square (OLS) regression technique is used to understand the relationships between various attributes with the level of cash holdings. Due to issues of endogeneity, the generalized method of moments method is also applied. Findings – Significant differences are found to exist in the level of cash holdings between firms and across time. It is found that firms adjust to a target level of cash holdings, although this is done relatively slowly. Also, significance of firm characteristics and their relationships with cash holdings indicate that other than the pecking order theory, the trade-off theory and the agency theory can help explain the level of cash holdings of firms in Malaysia. Originality/value – Most studies on cash holdings have been carried out in developed countries. Malaysia is an advanced emerging market with significant state control and firm structure being largely family-oriented. Hence, a study on a different market with different types of firm structures will contribute significantly to the existing literature on corporate cash holdings.

PurposeThe aim of this paper is to analyze the differences in bank characteristics of Islamic and conventional banks in Malaysia, especially when it comes to their profitability, capital adequacy, liquidity, operational efficiency and asset quality are also considered. Corporate governance issues and economic conditions are also included in the analysis.Design/methodology/approachA total of 14 banks (nine conventional and five Islamic) were considered over the period of 2005‐2009. Three stages of analysis were performed. First, descriptive statistics were computed to understand the differences in characteristics of the two types of banks. Next, to determine whether these differences were significant, independent t‐tests were carried out on each variable. Finally, regression analysis was carried out to analyze the effect of the variables on bank profitability.FindingsIt is found that the return on average assets, bank size and board size values of conventional banks was higher compared to Islamic banks. The other variables – operational efficiency, asset quality, liquidity, capital adequacy and board independence – were higher for Islamic banks. Significant differences between the two bank types were found for all the variables, except for profitability and board independence. All variables except for liquidity, board characteristics and type of bank, were found to be highly significant in affecting profitability.Originality/valueThis paper looks at the differences between Islamic and conventional banking systems in Malaysia. Contrasting results were found for the independent t‐tests and regression analysis, which makes it an interesting study that should be pursued further.

The paper examines the determinants of the level of investment in net operating working capital by firms in Malaysia. Data from 192 companies spanning a period of 8 years (20002007) are analysed using the OLS regression technique for this purpose. The study finds that in times of economic expansion, younger and smaller firms with less tangible assets, low leverage, high immediate sales growth, high operating cash flows, less volatile revenues and low levels of asymmetric information are likely to have the highest investments in operating working capital. Board characteristics, namely size and the independence of the board, are not found to have any significant influence on the working capital investment of firms.

This study examines the compliance and disclosure levels of corporate governance practices of Malaysian firms under the MCCG 2012. Additionally, the study aims to deepen our understanding of the main drivers of corporate governance reporting in one of the fast developing countries in Asia. Data for 84 top companies listed with Bursa Malaysia are extracted from their 2013 annual reports. Sixty-four corporate governance disclosure items are utilised to develop a disclosure index which is taken as the dependent variable. The overall voluntary compliance and disclosure in Malaysia's top listed companies is good with an average of 77.1%, with minimum compliance level being 50% and maximum being 90%. Firm characteristics and corporate governance mechanisms are taken as the independent variables. Using OLS regression, the study finds that board size, institutional ownership, foreign ownership, profitability, and auditor size are the main determinants of corporate governance disclosure in Malaysia under MCCG 2012. The paper contributes to literature on disclosure and the reported findings are broadly consistent with the notion that good corporate governance generally leads to better corporate disclosure and transparency in developing capital markets.

This study measures the influence of six university qualities, namely academic quality, academic staff quality, management quality, industrial link quality and facilities’ quality on emotional attachment. A sample of 489 undergraduate students of a private higher acadecmic institution was collected. Using structural equation modeling, it is found that management quality, academic program quality, facilities quality and industrial link quality form significant relationship with emotional attachment. The results provide important findings to researchers for future research directions and management of higher education institutions (HEIs).