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Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies

Initial public offering (IPO) is an extraordinary corporate event in Malaysia because apart from being a vital source of finance, it has also been extensively used in implementing government fiscal policy measures for redistribution of income, wealth creation and corporate ownership restructuring wh...

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Main Author: Kalgo, Sani Hussaini
Format: Thesis
Language:English
Published: 2015
Online Access:http://psasir.upm.edu.my/id/eprint/67658/1/GSM%202015%2018%20IR.pdf
http://psasir.upm.edu.my/id/eprint/67658/
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spelling my.upm.eprints.676582019-03-22T00:40:01Z http://psasir.upm.edu.my/id/eprint/67658/ Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies Kalgo, Sani Hussaini Initial public offering (IPO) is an extraordinary corporate event in Malaysia because apart from being a vital source of finance, it has also been extensively used in implementing government fiscal policy measures for redistribution of income, wealth creation and corporate ownership restructuring which are the cornerstones of the peaceful coexistence of its multicultural society. In the spirit of IPO‟s significance in Malaysia, this thesis examines four separate issues. First, it investigates real and accrual earnings management discretionary behaviour of Malaysian IPO firms listed on Bursa Malaysia in the period 2002-2013 in terms of nature, direction and quantum. Second, third and fourth issues relate to the impact of institutional ownership, moratorium regulation and retained ownership on IPO firm‟s earnings management (both real and accrual discretionary behavior) respectively. Applying models developed by Dechow et al. (1995) and Roychowdhury (2006) to measure IPO firm‟s accruals and real earnings management respectively, the results indicate that first, Malaysian IPO firms engage in both real and accrual discretionary behaviour around the IPO corporate event. Second, it confirms institutional shareholders‟ ability to constrain IPO firms‟ earnings management in line with international evidence. Third, the results indicate that share moratorium firms exhibit higher earnings management than non-share moratorium firms albeit statistically insignificant. This supports the Securities Commission Malaysia and Bursa Malaysia‟s policy guideline of subjecting all IPO firms to share moratorium regulations as a commitment device to reduce information asymmetry. Finally, the research document evidence of a significant negative association between retained ownership and real earnings management which is understandable given its impact on firm value. Additionally, the results provide evidence of trade-off between accrual and real earnings discretionary behaviour among Malaysian IPO firms as a result of tightening of regulations and various regulatory reforms. It reflects the importance of individual line accounting items instead of relying solely on earnings for investors‟ valuation of the IPO firms apart from considering real earnings management activities in their investment strategy. Overall, the study adds to IPO earnings management literature by providing better understanding of Malaysian IPO firms‟ reporting behavior and reinforces the need to constrain real earnings management by regulators. 2015-02 Thesis NonPeerReviewed text en http://psasir.upm.edu.my/id/eprint/67658/1/GSM%202015%2018%20IR.pdf Kalgo, Sani Hussaini (2015) Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies. PhD thesis, Universiti Putra Malaysia.
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description Initial public offering (IPO) is an extraordinary corporate event in Malaysia because apart from being a vital source of finance, it has also been extensively used in implementing government fiscal policy measures for redistribution of income, wealth creation and corporate ownership restructuring which are the cornerstones of the peaceful coexistence of its multicultural society. In the spirit of IPO‟s significance in Malaysia, this thesis examines four separate issues. First, it investigates real and accrual earnings management discretionary behaviour of Malaysian IPO firms listed on Bursa Malaysia in the period 2002-2013 in terms of nature, direction and quantum. Second, third and fourth issues relate to the impact of institutional ownership, moratorium regulation and retained ownership on IPO firm‟s earnings management (both real and accrual discretionary behavior) respectively. Applying models developed by Dechow et al. (1995) and Roychowdhury (2006) to measure IPO firm‟s accruals and real earnings management respectively, the results indicate that first, Malaysian IPO firms engage in both real and accrual discretionary behaviour around the IPO corporate event. Second, it confirms institutional shareholders‟ ability to constrain IPO firms‟ earnings management in line with international evidence. Third, the results indicate that share moratorium firms exhibit higher earnings management than non-share moratorium firms albeit statistically insignificant. This supports the Securities Commission Malaysia and Bursa Malaysia‟s policy guideline of subjecting all IPO firms to share moratorium regulations as a commitment device to reduce information asymmetry. Finally, the research document evidence of a significant negative association between retained ownership and real earnings management which is understandable given its impact on firm value. Additionally, the results provide evidence of trade-off between accrual and real earnings discretionary behaviour among Malaysian IPO firms as a result of tightening of regulations and various regulatory reforms. It reflects the importance of individual line accounting items instead of relying solely on earnings for investors‟ valuation of the IPO firms apart from considering real earnings management activities in their investment strategy. Overall, the study adds to IPO earnings management literature by providing better understanding of Malaysian IPO firms‟ reporting behavior and reinforces the need to constrain real earnings management by regulators.
format Thesis
author Kalgo, Sani Hussaini
spellingShingle Kalgo, Sani Hussaini
Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies
author_facet Kalgo, Sani Hussaini
author_sort Kalgo, Sani Hussaini
title Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies
title_short Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies
title_full Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies
title_fullStr Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies
title_full_unstemmed Earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the Malaysian IPO companies
title_sort earnings management practices and the impact of institutional ownership, share moratorium and retained ownership on earnings management discretionary behaviour of the malaysian ipo companies
publishDate 2015
url http://psasir.upm.edu.my/id/eprint/67658/1/GSM%202015%2018%20IR.pdf
http://psasir.upm.edu.my/id/eprint/67658/
_version_ 1643838970610581504
score 13.211869

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