Corporate Governance Characteristics and the Quality of Accounting Information in Malaysian Shariah- Compliant Listed Companies

• Main Author: Hussain Khalifa Hussain Al-Kdai
• Format: Thesis
• Language: English
• Published: Universiti Sains Islam Malaysia 2015
• Online Access: http://ddms.usim.edu.my/handle/123456789/7849

Using the panel data estimations (fixed effect, random effect, pooled OLS) for a sample of 270 Malaysian Shariah-Compliant companies for the period from 2007 to 2009, this thesis aims to investigate the relationship between corporate governance characteristics and quality of accounting information measured as less earnings management, more conservative accounting, and more value relevance of accounting information. The corporate governance characteristics used in this study are related to the board of directors and audit committee, namely, the size of board of directors, the independency of the board of directors, CEO duality, the percentage of the Muslim members in the board, the size of audit committee, the audit committee independency, the percentage of accounting experts in audit committee, and finally the percentage of Muslim members in audit committee. For specific company’s characteristics are regressed in the models as control variables including the size, leverage, profitability, and audit firm size. It is expected that the strong corporate governance mechanism influences positively and significantly the quality of accounting information by mitigating earnings management practice, increasing the adoption of more conservative accounting and increasing the value relevance accounting information. Three models are used, the modified Jones model suggested by Dechew at al ( 1995 ) to measure earnings management, the Ball and Shivakumar’s (2005) accruals model to measure conservatism accounting, and Ohlson (1995) model to measure value relevance of accounting information. Moreover, after transforming the data to become normally distributed and ensuring that the models do not suffer from Multi-collinearity problem and correcting for Autocorrelation and Heteroskedasticity problems when they were detected, the results show that none of the corporate governance characteristics used in this study contributes to produce high quality of accounting information in the three dimensions approach of less earnings management, more conservatism accounting and more value relevance of accounting information. Some of these characteristics affect just one dimension and one of them affects the quality of accounting information in two dimensions as well as some characteristics were neutral. The results also show that the larger companies were more likely to produce high quality accounting information in the three dimensions.