Effects of ownership structure and monitoring mechanisms on earnings quality and market assessment

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dc.contributor.authorAbdul Latiff, Radziah
dc.date.accessioned2014-10-27T03:29:30Z
dc.date.available2014-10-27T03:29:30Z
dc.date.issued2009
dc.descriptionPhDen_US
dc.description.abstractThis thesis is motivated by the move towards a market-based regulation or selfregulation for the Malaysian capital market. In such environment the quality of information is important. Against a background of companies’ ownership structure that allegedly exacerbates the separation of ownership and control conflict, and that possibly limits transparency of information to the public, this thesis examines if such ownership structure leads to lower earnings quality. Earnings ia an important information to the market. And if indeed the market is self-regulating this thesis examines if the market is assessing earnings quality and the elements of governance; ownership structure and the monitoring mechanisms (audit committee and substantial shareholding). The market assesses these elements by requiring a certain return, the cost of equity, where accordingly these elements are perceived to be an information risk. This study is based on a sample of listed companies for the accounting year end 2004. The earnings quality measures used are accrual quality, discretionary accruals, persistence and predictability. It is found that substantial shareholding, a market mechanism, to be significantly associated with the discretionary earnings quality which suggests the substantial shareholders is an important monitoring mechanism. This is in contrast to the results of a rule based mechanism, audit committee. None of the characteristics of audit committee (independence and competence) is significantly associated with all measures of earnings quality and neither are they priced. This has an important implication on the relative spending of resources by regulators on market and rule based mechanisms. The finding that substantial shareholding is priced is a significant contribution as it suggests that substantial shareholding is a mechanism that increases proprietary information flow to the public and hence reduces information risk. This study, however has not found any evidence that relates cash flow /voting rights and the type of controlling party (family, government, institution, company and management) with earnings quality and the cost of equity. This study contributes new evidence in Malaysia that earnings quality influences cost of equity. The results for accruals quality and predictability are consistent across the two measures of cost of equity. Discretionary accruals are significantly associated with one measure of cost of equity. An important implication is that companies may achieve their objectives by engaging in activities that lead to lower earnings quality, but they stand to pay a higher price in the form of higher cost of equity.en_US
dc.identifier.urihttp://hdl.handle.net/123456789/148
dc.language.isoenen_US
dc.subjectManagementen_US
dc.subjectOwnership structureen_US
dc.subjectMonitoring mechanismsen_US
dc.subjectEarnings qualityen_US
dc.subjectMarket assessmenten_US
dc.titleEffects of ownership structure and monitoring mechanisms on earnings quality and market assessmenten_US
dc.typeThesisen_US
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