Open AccessInnate Factors: The Importance on Earnings Quality in Malaysia
Author(s) -
Laila Musa,
Malaysia Politeknik Tuanku Syed Sirajuddin
Publication year - 2018
Publication title -
international journal of business and management
Language(s) - English
Resource type - Journals
ISSN - 2590-3721
DOI - 10.26666/rmp.ijbm.2018.4.3
Subject(s) - earnings , earnings quality , quality (philosophy) , accrual , panel data , business , investment (military) , cash flow , economics , accounting , econometrics , philosophy , epistemology , politics , political science , law
Innate factors are important determinants of earnings quality of the firm. Most previous studies have not emphasized the potential importance of innate factors individually towards earnings quality. Therefore, this study aims to examine the importance of innate factors as determinant factors of earnings quality in Malaysia. The data collection was made through 2,549 firm year observed data consisting of 728 listed companies in Bursa Malaysia from the year 2006 until year 2010. Data collected were analyzed using panel data regression techniques in determining the influence of economic factors towards earnings quality. Measurement of earnings quality is based on the accrual quality. The results showed that the firm size, variability of cash flows, length of operating cycle, incidence of losses and investment opportunities have a significant influence in describing earnings quality. On the other hand variability of sales and capital intensity proved these factors were not significantly important in describing earnings quality. Overall, this study could give a significant contribution to the literature that innate factors have their own importance as determinant factors of earnings quality in Malaysia.