Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia
Based on a sample of 2,034 Malaysian listed firm-year observations for the period 2007–2014, this study shows a negative relationship between dimensions of political patronage (i.e., politically connected firms and the percentage of Bumiputera directors) and analysts' earnings forecast accuracy...
| Main Authors: | , |
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| Format: | Journal Article |
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American Accounting Association
2021
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| Online Access: | http://hdl.handle.net/20.500.11937/84665 |
| _version_ | 1848764669287727104 |
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| author | Gist, Willie Abdul Wahab, Effiezal |
| author_facet | Gist, Willie Abdul Wahab, Effiezal |
| author_sort | Gist, Willie |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | Based on a sample of 2,034 Malaysian listed firm-year observations for the period 2007–2014, this study shows a negative relationship between dimensions of political patronage (i.e., politically connected firms and the percentage of Bumiputera directors) and analysts' earnings forecast accuracy. Furthermore, the study documents a positive relationship between Bumiputera directors and earnings forecast dispersion. These results suggest that the political patronage of firms is associated with low-quality earnings. We also find that measures of high audit quality are associated with high financial reporting quality and that this is evident in firms with high audit quality showing a weaker negative (positive) relationship between forecast accuracy (dispersion) and political connections and high levels of Bumiputera directors. Overall, the findings suggest that high audit quality plays an important role in mitigating agency costs of information asymmetry by improving the financial information environment. |
| first_indexed | 2025-11-14T11:23:02Z |
| format | Journal Article |
| id | curtin-20.500.11937-84665 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T11:23:02Z |
| publishDate | 2021 |
| publisher | American Accounting Association |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-846652021-08-10T01:07:26Z Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia Gist, Willie Abdul Wahab, Effiezal 1501 - Accounting, Auditing and Accountability Based on a sample of 2,034 Malaysian listed firm-year observations for the period 2007–2014, this study shows a negative relationship between dimensions of political patronage (i.e., politically connected firms and the percentage of Bumiputera directors) and analysts' earnings forecast accuracy. Furthermore, the study documents a positive relationship between Bumiputera directors and earnings forecast dispersion. These results suggest that the political patronage of firms is associated with low-quality earnings. We also find that measures of high audit quality are associated with high financial reporting quality and that this is evident in firms with high audit quality showing a weaker negative (positive) relationship between forecast accuracy (dispersion) and political connections and high levels of Bumiputera directors. Overall, the findings suggest that high audit quality plays an important role in mitigating agency costs of information asymmetry by improving the financial information environment. 2021 Journal Article http://hdl.handle.net/20.500.11937/84665 10.2308/JIAR-19-077 American Accounting Association fulltext |
| spellingShingle | 1501 - Accounting, Auditing and Accountability Gist, Willie Abdul Wahab, Effiezal Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia |
| title | Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia |
| title_full | Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia |
| title_fullStr | Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia |
| title_full_unstemmed | Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia |
| title_short | Political Patronage, Audit Quality and the Properties of Analysts' Earnings Forecasts in Malaysia |
| title_sort | political patronage, audit quality and the properties of analysts' earnings forecasts in malaysia |
| topic | 1501 - Accounting, Auditing and Accountability |
| url | http://hdl.handle.net/20.500.11937/84665 |