Institutional Factors and Conditional Conservatism in Malaysia: Does International Financial Reporting Standards Convergence Matter?

Journal of Contemporary Accounting and Economics (Forthcoming)

Posted: 28 Sep 2016

See all articles by Marziana Madah Marzuki

Marziana Madah Marzuki

Universiti Teknologi MARA (UiTM) - Faculty of Accountancy

Effiezal Aswadi Abdul Wahab

Curtin University - School of Accounting

Date Written: September 26, 2016

Abstract

We examine the impact of International Financial Reporting Standards (IFRS) convergence on conditional conservatism in Malaysia. In addition, we examine the influence of various institutional factors, namely, political connections, Bumiputras directors, family firms and richest-men connections on conservatism. Prior literature presents evidence of IFRS convergence on conservatism, but limited evidence exists on the role of institutional factors on conservatism. Using a sample of 1760 firm-year observations from 2004 to 2008, we provide evidence that IFRS enhances conservatism. Firms with Bumiputras directors and family firms are more conservative post-IFRS convergence, whereas the reverse behaviour results for firms with richest-men connections. We find no evidence of politically connected firms being more conservative post-IFRS convergence. Our study provides knowledge on the role of IFRS in conditional conservatism and the role of institutional factors in this relationship.

Keywords: Earnings Conservatism, Malaysia, International Financial Reporting Standards

JEL Classification: M41, M48, G34, G38

Suggested Citation

Marzuki, Marziana Madah and Abdul Wahab, Effiezal Aswadi, Institutional Factors and Conditional Conservatism in Malaysia: Does International Financial Reporting Standards Convergence Matter? (September 26, 2016). Journal of Contemporary Accounting and Economics (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2844024

Marziana Madah Marzuki

Universiti Teknologi MARA (UiTM) - Faculty of Accountancy ( email )

Menara SAAS
Level 11, UiTM
Shah Alam, Selangor 40500
Malaysia

Effiezal Aswadi Abdul Wahab (Contact Author)

Curtin University - School of Accounting ( email )

Australia

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