Corporate governance and real earnings management in Malaysian public listed firms

The requirement for an enhanced quality of financial reportage has become a crucial challenge for investors and other stakeholders owing to the financial scandal experienced in Malaysian nonfinancial establishments. Connected to this issue, this study investigates whether corporate governance mechanisms (board structure and ownership structure) have an impact on real earnings management (REM) practices in non-financial organizations in Malaysia. The unit of analysis of this research is 30 non-financial establishments listed in the Malaysian stock exchange covering the period 2012 to 2019. Data on board structure (board size, board meeting frequency, female director, CEO tenure, and independent directors) and ownership structure (block ownership, foreign ownership, family ownership, and managerial ownership) are utilized in examining their relationship with REM. Applying panel data, the multiple regression analysis is used to identify the relationship amongst internal corporate governance mechanisms with REM. The outcome demonstrated a positive significant relationship among board size, as well as block ownership with REM. Whilst CEO tenure and foreign ownership showed a positive but insignificant relationship with REM. Nevertheless, there exist a negative significant relationship among the frequency of board meeting and independent directors with REM, Equally, female directors, family ownership, and managerial ownership have a negative insignificant relationship with REM. The outcome is fundamental to regulators, investors, policymakers as well as other stakeholders, as the results of this research acknowledged the vital role performed by both board and ownership structure in improving the quality of financial reporting.