Governance Structure, Ownership Structure and Earnings Predictability: Malaysian Evidence

Abstract

This study is distinct from prior research focusing mainly on the relationship of corporate governance mechanisms to earnings management or earnings informativeness because it examines the associations between governance structure, ownership structure, and earnings predictability. Using a sample of 330 firms for the period of 2008 through 2009, the findings reveal that the predictive ability of earnings is high when firms have small boards, an independent chairperson, and high shareholding by institutions. However, in contradiction to our expectation is the significant but negative effect of board independence on earnings predictability. The results also demonstrate that investors do not perceive independent audit committees, more active audit committees, competent audit committees, and a high shareholding of management as good indicators of earnings numbers with a high predictive value.