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Does audit committee constrain firms’ risks in Malaysian family manufacturing firms?

Does audit committee constrain firms’ risks in Malaysian family manufacturing firms? The purpose of this study is to investigate the association between audit committees’ characteristics and firms’ risk in Malaysian manufacturing firms.Design/methodology/approachThe effect of audit committees on firms’ risk is investigated by 930 firm-year observations between the fiscal years of 2004 and 2009 of Bursa Malaysia listed firms during the global financial crisis. Panel data regression analysis is used to analyze the relationship.FindingsThe findings of this study indicate that audit committee’s independence reduces firms’ risk. Nonetheless, across various analysis, the authors fail to associate audit committee’s qualification and membership in professional bodies with firms’ risk. Consistently, the authors find that family ownership is negatively associated with IDIOSYNCRATIC risks, supporting previous studies claim that family firms are more risk averse than non-family firms.Research limitations/implicationsThe analysis is confined to Malaysian family manufacturing sectors during global financial crisis 2007–2008.Originality/valueThis study offers insights into the importance of audit committees’ qualification and knowledge in Malaysian family manufacturing firms in reducing firms’ risk and providing stability to investors investment. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting Research Journal Emerald Publishing

Does audit committee constrain firms’ risks in Malaysian family manufacturing firms?

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References (35)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1030-9616
eISSN
1030-9616
DOI
10.1108/arj-01-2021-0025
Publisher site
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Abstract

The purpose of this study is to investigate the association between audit committees’ characteristics and firms’ risk in Malaysian manufacturing firms.Design/methodology/approachThe effect of audit committees on firms’ risk is investigated by 930 firm-year observations between the fiscal years of 2004 and 2009 of Bursa Malaysia listed firms during the global financial crisis. Panel data regression analysis is used to analyze the relationship.FindingsThe findings of this study indicate that audit committee’s independence reduces firms’ risk. Nonetheless, across various analysis, the authors fail to associate audit committee’s qualification and membership in professional bodies with firms’ risk. Consistently, the authors find that family ownership is negatively associated with IDIOSYNCRATIC risks, supporting previous studies claim that family firms are more risk averse than non-family firms.Research limitations/implicationsThe analysis is confined to Malaysian family manufacturing sectors during global financial crisis 2007–2008.Originality/valueThis study offers insights into the importance of audit committees’ qualification and knowledge in Malaysian family manufacturing firms in reducing firms’ risk and providing stability to investors investment.

Journal

Accounting Research Journal – Emerald Publishing

Published: Aug 16, 2022

Keywords: Corporate governance; Audit committee; Firms’ risks; Family ownership; Manufacturing firms

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