The moderating effects of real earnings management on value relevance of accounting information: Evidence from Malaysia

Firm value represents the economic worth of a firm. It is a good indicator of investorperception about a firm‟s prospect. Many factors influence firm value; one of the most influencing factors is accounting information. Therefore, unbiased accounting information is of the utmost importance. Otherwise, it will be considered irrelevant for decision-making by investors and will result in lower value relevance (firm value) of accounting information. The primary accounting information earning is losing value relevance due to the earnings management practices by the Malaysian listed firms. Investors are now relying more on other accounting information for decisionmaking. Real earnings management is common phenomenon in Malaysia. Therefore, this study investigates value relevance of earning, book value of equity. Due to inconsistencies in prior studies, the moderating role of real earnings management on the value relevance of earning and book value of equity is also examined. The sample of 250 public listed companies were used to test the hypotheses over the period 2014-2018. Using Discoll-Kraay multivariate regression, this study finds that earning and book value of equity is value relevant, and real earnings management moderates the value relevance of earning and book value of equity. These results have theoretical implications for signaling theory and practical implications for the regulators to improve investors‟ perception regarding quality of accounting information as well.