Authors : Redhwan Ahmed Al-Dhamari and Ku Nor Izah Bt Ku Ismail
Abstract: This study examines whether the association between selected governance variables and earnings informativeness depends on surplus free cash flow agency problem in the Malaysian environment where concentrated shareholding by family members is common and minority investor protection is relatively weak. The results find that boards with a higher proportion of independent directors and competent audit committees are more likely to report informative earnings numbers. We also demonstrate that firms with independent chairman, small boards and high surplus free cash flow experience informative earnings figures. However, in contradiction to the expectation are the negative influence of audit committee meetings, audit committee competence and shareholding by executive directors when agency problems of surplus free cash flow are high. The findings of this study suggest regulatory bodies to design corporate governance code that is suitable for Malaysian environment and can help regaining investors’ confidence towards accounting and financial information.
Redhwan Ahmed Al-Dhamari and Ku Nor Izah Bt Ku Ismail, 2013. Surplus Free Cash Flow and the Effect of Corporate Governance on the Informativeness of Earnings. International Business Management, 7: 214-228.