Board diversity and discretionary accruals of the top 100 Malaysia corporate governance (MCG) index company

摘要

This paper sought to?examine the relationship between board diversity and discretionary accruals practices. Data was obtained from annual report for the year 2008 of the top 100 companies in Malaysia corporate governance (MCG) index. The discretionary accrual is measured using modified Jones model. The link was tested between five board diversity (that is, size, independence, competency, remuneration and gender) and discretionary accruals practices. The perspective of resource based view and agency theory was invoked to explain the board diversity that could influence the practice of discretionary accrual. The study revealed that discretionary accruals occurred even for the top 100 MCG companies. Women on board are found to have a positive significant relationship with discretionary accruals which indicate that higher number of women board may increase the discretionary accruals activity. In addition, it was also found that cash flow had a negative significant relationship with discretionary accruals which showed that companies with lower cash flow tend to use accruals to increase earnings.