Deferred Taxes, Earnings Management, and Corporate Governance: Malaysian Evidence
Journal of Contemporary Accounting and Economics 9(1), pp. 1-18, 2013
Posted: 28 Sep 2013
Date Written: September 26, 2012
Abstract
This study examines whether Malaysian public listed companies (PLCs) use deferred taxes to avoid an earnings decline. In addition, this study also examines whether corporate governance mechanisms attenuate the extent to which deferred taxes are used to manage earnings. Using a sample of 221 PLCs listed on the main and second boards of Bursa Malaysia in 2008 with a complete set of data available from 2005 to 2008, this study finds that Malaysian PLCs use both the accrual and valuation allowance components of net deferred tax liabilities to avoid a decline in earnings. The study also finds that ownership structure and board structure affect the extent to which earnings management is associated with a deferred tax component.
Keywords: Deferred Taxes, Earnings Management, Corporate Governance, Malaysia
JEL Classification: G30, G32
Suggested Citation: Suggested Citation