The effect of underinvestment on the relationship between earnings management and information asymmetry

Aulia Fuad Rahman, Mohamat Sabri Hassan, Norman Mohd Saleh, Zaleha Abdul Shukor

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

Earnings management is often investigated from the opportunistic perspective and rarely from the informational perspective. This study investigates earnings management from the informational perspective by incorporating underinvestment as a moderating variable in the relationship between earnings management and information asymmetry. A panel data regression analysis on firms listed on the Main Board of Bursa Malaysia reveals that earnings management reduces information asymmetry. We also provide evidence that underinvestment moderates the relationship between earnings management and information asymmetry. This finding suggests that earnings management among underinvesting firms reduces information asymmetry. Therefore, underinvestment motivates managers to convey informational earnings management.

Original languageEnglish
Pages (from-to)1-28
Number of pages28
JournalAsian Academy of Management Journal of Accounting and Finance
Volume9
Issue number2
Publication statusPublished - 2013

Fingerprint

Earnings management
Information asymmetry
Underinvestment
Malaysia
Regression analysis
Moderating variables
Panel data
Managers

Keywords

  • Information asymmetry
  • Informational earnings management
  • Malaysia
  • Opportunistic earnings management
  • Underinvestment

ASJC Scopus subject areas

  • Accounting
  • Finance

Cite this

@article{c672cc240ff942e8b2ca0c49b4f8c5a1,
title = "The effect of underinvestment on the relationship between earnings management and information asymmetry",
abstract = "Earnings management is often investigated from the opportunistic perspective and rarely from the informational perspective. This study investigates earnings management from the informational perspective by incorporating underinvestment as a moderating variable in the relationship between earnings management and information asymmetry. A panel data regression analysis on firms listed on the Main Board of Bursa Malaysia reveals that earnings management reduces information asymmetry. We also provide evidence that underinvestment moderates the relationship between earnings management and information asymmetry. This finding suggests that earnings management among underinvesting firms reduces information asymmetry. Therefore, underinvestment motivates managers to convey informational earnings management.",
keywords = "Information asymmetry, Informational earnings management, Malaysia, Opportunistic earnings management, Underinvestment",
author = "Rahman, {Aulia Fuad} and Hassan, {Mohamat Sabri} and {Mohd Saleh}, Norman and {Abdul Shukor}, Zaleha",
year = "2013",
language = "English",
volume = "9",
pages = "1--28",
journal = "Asian Academy of Management Journal of Accounting and Finance",
issn = "1823-4992",
publisher = "Universiti Sains Malaysia",
number = "2",

}

TY - JOUR

T1 - The effect of underinvestment on the relationship between earnings management and information asymmetry

AU - Rahman, Aulia Fuad

AU - Hassan, Mohamat Sabri

AU - Mohd Saleh, Norman

AU - Abdul Shukor, Zaleha

PY - 2013

Y1 - 2013

N2 - Earnings management is often investigated from the opportunistic perspective and rarely from the informational perspective. This study investigates earnings management from the informational perspective by incorporating underinvestment as a moderating variable in the relationship between earnings management and information asymmetry. A panel data regression analysis on firms listed on the Main Board of Bursa Malaysia reveals that earnings management reduces information asymmetry. We also provide evidence that underinvestment moderates the relationship between earnings management and information asymmetry. This finding suggests that earnings management among underinvesting firms reduces information asymmetry. Therefore, underinvestment motivates managers to convey informational earnings management.

AB - Earnings management is often investigated from the opportunistic perspective and rarely from the informational perspective. This study investigates earnings management from the informational perspective by incorporating underinvestment as a moderating variable in the relationship between earnings management and information asymmetry. A panel data regression analysis on firms listed on the Main Board of Bursa Malaysia reveals that earnings management reduces information asymmetry. We also provide evidence that underinvestment moderates the relationship between earnings management and information asymmetry. This finding suggests that earnings management among underinvesting firms reduces information asymmetry. Therefore, underinvestment motivates managers to convey informational earnings management.

KW - Information asymmetry

KW - Informational earnings management

KW - Malaysia

KW - Opportunistic earnings management

KW - Underinvestment

UR - http://www.scopus.com/inward/record.url?scp=84897800998&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84897800998&partnerID=8YFLogxK

M3 - Article

VL - 9

SP - 1

EP - 28

JO - Asian Academy of Management Journal of Accounting and Finance

JF - Asian Academy of Management Journal of Accounting and Finance

SN - 1823-4992

IS - 2

ER -