Faculty of Accountancy

PurposeThe purpose of this paper is to examine the relationship between accounting conservatism, corporate governance and political connection in listed firms in Malaysia where political influence plays a significant role in the capital market and in many business dealings.Design/methodology/approachBy utilizing 824 firm-year observations comprising large listed companies over a period of four years from 2004, this study uses ordinary least squares regression models to investigate the relationship between accounting conservatism, corporate governance and political connections in Malaysia. Multiple measures of conservatism developed by Basu (1997) and Khan and Watts (2009) are employed.FindingsThe results show evidence of accounting conservatism (bad news being recognized earlier than good news) in Malaysia. Further, the results reveal that better corporate governance structure in terms of board independence is positively associated with accounting conservatism while management owner...

This paper reviews various theories of corporate governance in the attempt to explain the variation in the level of accounting quality in a setting with the adoption of Anglo-American corporate governance system, yet many aspects of business dealings of the setting are heavily influenced by politics. Although many prior studies examining accounting quality and corporate governance from the point of view of agency theory, the review from this paper suggests that accounting quality may also be attributed due to the presence of political influence in corporate governance structural mechanisms in firms which can be explained from resource dependency theory. The integration of the agency and resource dependency theories is appropriate in understanding what contributes to the provision of resources and effective monitoring. The theoretical contribution from this paper can be extended to future research examining quality of reporting in markets where resources allocation is highly politica...