Political Connections, Institutional Monitoring and Earnings Quality in Malaysia

2016 ◽  
Author(s):  
Tee Ming ◽  
Ferdinand A. Gul ◽  
Abdul Majid
Keyword(s):  
Earnings Quality ◽  
Political Connections ◽  
Institutional Monitoring

Earnings persistence, institutional investors monitoring and types of political connections

2020 ◽  
Vol 28 (3) ◽  
pp. 309-327
Author(s):  
Chwee Ming Tee ◽  
Puspavathy Rasiah
Keyword(s):  
Institutional Investors ◽  
Earnings Quality ◽  
Political Connections ◽  
Earnings Persistence ◽  
Ceo Power ◽  
Content Type ◽  
Audit Firm ◽  
Political Ties ◽  
Different Types ◽  
Big Four

PurposeThe purpose of this study is to examine whether institutional investors monitoring attenuate (exacerbate) weaker earnings persistence in politically connected firms (PCFs). In addition, it investigates whether earnings persistence do vary according to different types of political connections.Design/methodology/approachThis study employs earnings persistence as measure of earnings quality and ordinary least squares (OLS) model to examine: (1) the moderating effect of institutional investors’ ownership on the association between earnings persistence and PCFs and (2) the association between different types of political connections and earnings persistence.FindingsThis study finds that institutional investors' ownership attenuates weaker earnings quality in PCFs, indicating effective monitoring. However, stronger earnings persistence is associated with PCFs with longer political ties, audited by big four audit firm and with higher CEO power.Originality/valueThis study reveals the lower earnings persistence in PCFs can be attenuated by institutional investors monitoring. However, findings also suggest that earnings persistence in PCFs is affected by duration of political ties, big four audit firm and CEO power. This suggests that PCFs should not be viewed as a homogeneous group of firms.

scholarly journals Military Background, Political Connection, Audit Quality And Earning Quality

2020 ◽  
Vol 24 (1) ◽  
pp. 79
Author(s):  
Arif Widodo, Zaenal Fanani
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Political Connections ◽  
Political Connection ◽  
Military Background ◽  
Earning Quality ◽  
Relationship Of ◽  
The Military ◽  
The Relationship

This research is try to determine the effect of military background and political connections on earning quality with audit quality as a mediator. This research uses a quantitative approach using a sample of mining sector company that listing in Indonesia Stock Exchange in the 2017-2018 periods. The conclusion of this research points out that military background has positive effect on audit quality and political connections negatively affect earning quality. While earning quality not effected by the military background, political connections do not effect audit quality, and earnings quality not effected by audit quality. Likewise, for the hypothesis, mediation of the audit quality has no effect on the relationship of military background and political connections to earnings quality.

scholarly journals Political connections and earnings quality

2016 ◽  
Vol 24 (4) ◽  
pp. 339-356 ◽  
Author(s):  
Iman Harymawan ◽  
John Nowland
Keyword(s):  
Design Methodology ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Political Stability ◽  
Political Connections ◽  
Content Type ◽  
Government Effectiveness ◽  
Different Dimensions ◽  
Market Pressures

Purpose The purpose of this study is to investigate how the earnings quality of politically connected firms is affected by changes in political stability and government effectiveness in a developing country. Design/methodology/approach This study uses a sample of 2,073 firm-year observations from 349 firms listed on the Indonesian Stock Exchange from 2003 to 2012 to examine how political stability and government effectiveness affect the earnings quality of politically connected firms, relative to non-politically connected firms. A two-stage model is used to address self-selection issues in the choice of firms to establish political connections. Findings This study finds that increased government effectiveness reduces the benefits of political connections, requiring politically connected firms to be more responsive to market pressures and resulting in higher earnings quality. However, increased political stability enhances the certainty of benefits from political connections, reducing the need for politically connected firms to respond to market pressures and resulting in lower earnings quality. Research limitations/implications For policymakers, these results indicate that different dimensions of political and economic development can affect the incentives of firms with political connections in different ways. Originality/value This study finds that the earnings quality of politically connected firms increases as government effectiveness improves, but it decreases as the political environment becomes more stable.

Political connections, institutional investors monitoring and stock price synchronicity

2017 ◽  
Vol 43 (11) ◽  
pp. 1236-1253 ◽  
Author(s):  
Chwee Ming Tee
Keyword(s):  
Institutional Investors ◽  
Stock Price ◽  
Agency Problems ◽  
Institutional Ownership ◽  
Political Connections ◽  
Stock Price Synchronicity ◽  
Content Type ◽  
Institutional Monitoring ◽  
Moderating Role

Purpose The purpose of this paper is to examine the association between politically connected (POLCON) firms and stock price synchronicity, and whether this association can be attenuated by institutional investors. Design/methodology/approach This paper uses an ordinary least square regression model to examine the association between POLCON firms and stock price synchronicity; institutional ownership and stock price synchronicity; the moderating role of institutional ownership on the association between POLCON firms and stock price synchronicity; institutional domiciles and stock price synchronicity; and the moderating role of institutional domiciles on the association between POLCON firms and stock price synchronicity. Findings The result shows that POLCON firms are positively associated with stock price synchronicity. Further, the author also finds that institutional monitoring, through higher ownership by local institutional investors is associated with lower stock price synchronicity. In addition, this study documents evidence that institutional investors, particularly local institutional investors can improve stock price informativeness in POLCON firms. Research limitations/implications The results suggest that POLCON firms are plagued by severe agency problems, resulting in limited flow of firm-specific information to the capital markets. However, the author shows that POLCON firm’s agency problems can be attenuated through effective monitoring by institutional investors. Further, institutional domiciles are shown to be significantly associated with stock price synchronocity. However, effective monitoring is largely driven by local institutional investors, in line with the geographical proximity theory. Practical implications The results suggest that regulators should increase their surveillance and monitoring effort, particularly on firms with close ties to the government. In particular, POLCON firms should be required to be more transparent in their corporate dealings. Additionally, auditors should intensify their audit efforts on POLCON firm to provide more reliable financial information to minority shareholders, investors and analysts. Finally, institutional investors should be incentivized by the Malaysian Securities Commission, via, the code of governance to play an effective monitoring role in Malaysian firms. Originality/value This study reveals that POLCON firms’ severe agency problems can be alleviated by effective institutional monitoring. Further result identifies institutional domiciles as a significant factor in influencing monitoring effectiveness in POLCON firms. This paper provides insights into the dynamic interaction between political connections, institutional monitoring, firm governance and capital markets behavior of an emerging market.

scholarly journals Does Sustainable Corporate Governance Enhance Accounting Practice? Evidence from the Korean Market

2020 ◽  
Vol 12 (7) ◽  
pp. 2585 ◽  
Author(s):  
Daeheon Choi ◽  
Paul Moon Sub Choi ◽  
Joung Hwa Choi ◽  
Chune Young Chung
Keyword(s):  
Corporate Governance ◽  
Value Relevance ◽  
Earnings Quality ◽  
Corporate Sustainability ◽  
Earnings Persistence ◽  
Governance Mechanism ◽  
Institutional Monitoring ◽  
Korean Market ◽  
The Impact ◽  
The Relationship

As corporate sustainability continues to improve and enhance the principles of good corporate governance, firms are exerting increasing efforts in terms of transparency and public disclosure. Transparency efforts provide information to the general public on the relationship between corporate governance and improved sustainability. The better informed shareholders are about the connection between corporate governance and sustainability, the more apparent the relationship will become over time. Prior studies assume that blockholders engage in active institutional monitoring by intervening directly in firms’ operations. In contrast, we argue that passive institutional monitoring is a more feasible governance mechanism in the Korean market owing to the market’s unique features (i.e., chaebols and pressure sensitivity). In particular, focusing on the blockholdings of the Korean National Pension Service (KNPS), we study the impact of passive monitoring on firms’ earnings quality, represented by earnings persistence, value relevance, and timeliness. The empirical evidence shows that KNPS blockholdings have a positive and significant impact on corporate earnings quality, indicating that passive blockholder monitoring is a more efficient channel for improving earnings quality in South Korea. Our results may be generalized to other emerging markets in which a few entities with concentrated economic power engender pressure-sensitive corporate landscapes for sustainability.

scholarly journals Director Networks, Political Connections, and Earnings Quality in Malaysia

2020 ◽  
Vol 16 (3) ◽  
pp. 687-724 ◽  
Author(s):  
Effiezal Aswadi Abdul Wahab ◽  
Mohd Faizal Jamaludin ◽  
Dian Agustia ◽  
Iman Harymawan
Keyword(s):  
Significant Relationship ◽  
Earnings Quality ◽  
Political Connections ◽  
The Political ◽  
Quality Of Information ◽  
Using Data ◽  
The Relationship ◽  
Entire Network ◽  
Political Connectedness

AbstractThis article investigates the relationship between director networks and earnings quality in Malaysia. Using data on 4,416 individual directors who served on the boards of 745 firms listed on Bursa, Malaysia during 2011, we map the entire network of directors and generate measures to reflect the size and quality of information within the network. We find a negative and significant relationship between the overall connectedness of a director's network and the firm's earnings quality. In addition, we find a negative and significant relationship between the political connectedness of the director's network and earnings quality. Our results are robust for different measures of earnings quality.

scholarly journals THE POLITICAL CONNECTIONS AND EARNINGS QUALITY IN INDONESIA: A SURVEY LITERATURE

AKUNTABILITAS ◽  
2020 ◽  
Vol 14 (1) ◽  
pp. 1-12
Author(s):  
Yeasy Darmayanti ◽  
Aza Azlina Md Kassim ◽  
Suryadimal Suryadimal
Keyword(s):  
Earnings Quality ◽  
Diagnostic System ◽  
Political Connections ◽  
The Political ◽  
Detailed Review ◽  
Earnings Information ◽  
The Future ◽  
Relationship Of ◽  
The Relationship

Providing information about quality earnings is the obligation of every company. Many factors are thought to affect the quality of earnings information issued by the company. One of these factors is political connections. Many studies see political connections from different perspectives. Some research indicates political connections will benefit individuals who carry out roles in politics and companies. Some more research has found that political connections will benefit the company. Apart from all that, of course the quality of profits disclosed by the company becomes questionable. This research contributes to providing a detailed review of different studies on the relationship of political connections and earnings quality, and tries to describe in more detail the matters relating to both. In the future, this new diagnostic system may be investigated in different contexts.

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