Board of Director Characteristics and Earnings Management in Malaysia

Abstract

This paper seeks to study the relation between
board of director characteristics as a corporate
governance mechanism and earnings management in
the Malaysian scenario. Earnings management is
measured by discretionary accruals and for estimating
discretionary accruals, Modified Jones Model is used.
Board of directors’ characteristics includes number of
meetings, existence of outside directors, financial
expertise and separation of the roles of chair and chief
executive officer. In this study, the multiple linear
regressions have been used. To test the hypothesis,
cross-sectional and pooled data of 71 companies listed
in Bursa Malaysia from 2001 to 2005 were used. The
results demonstrate that financial expertise are
positively related to earnings management in the
Malaysian scenario.