Reversal of impairment losses, firm performance and reporting incentives: Evidence from Malaysia

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dc.contributor.advisor Donnelly, Raymond en
dc.contributor.advisor Cao, Tong Yu en Shaari, Hasnah 2014-02-05T15:39:03Z 2014-02-05T15:39:03Z 2013 2013
dc.identifier.citation Shaari, H. 2013. Reversal of impairment losses, firm performance and reporting incentives: Evidence from Malaysia. PhD Thesis, University College Cork. en
dc.identifier.endpage 251
dc.description.abstract Malaysian Financial Reporting Standard (FRS) No. 136, Impairment of Assets, was issued in 2005. The standard requires public listed companies to report their non-current assets at no more than their recoverable amount. When the value of impaired assets is recovered, or partly recovered, FRS 136 requires the impairment charges to be reversed to its new recoverable amount. This study tests whether the reversal of impairment losses by Malaysian firms is more closely associated with economic reasons or reporting incentives. The sample of this study consists of 182 public companies listed on Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange) that reported reversals of their impairment charges during the period 2006-2009. These firms are matched with firms which do not reverse impairment on the basis of industrial classification and size. In the year of reversal, this study finds that the reversal firms are more profitable (before reversals) than their matched firms. On average, the Malaysian stock market values the reversals of impairment losses positively. These results suggest that the reversals generally reflect increases in the value of the previously impaired assets. After partitioning firms that are likely to manage earnings and those that are not, this study finds that there are some Malaysian firms which reverse the impairment charges to manage earnings. Their reversals are not value-relevant, and are negatively associated with future firm performance. On the other hand, the reversals of firms which are deemed not to be earnings managers are positively associated with both future firm performance and current stock price performance, and this is the dominant motivation for the reversal of impairment charges in Malaysia. In further analysis, this study provides evidence that the opportunistic reversals are also associated with other earnings management manifestations, namely abnormal working capital accruals and the motivation to avoid earnings declines. In general, the findings suggest that the fair value measurement in impairment standard provides useful information to the users of financial statements. en
dc.description.sponsorship Ministry of Education, Malaysia (Bumiputera Academic Training Scheme) en
dc.format.mimetype application/pdf en
dc.language.iso en en
dc.publisher University College Cork en
dc.rights © 2013, Hasnah Shaari en
dc.rights.uri en
dc.subject Reversal of impairment losses en
dc.subject Earnings management en
dc.subject IFRS en
dc.subject Abnormal accruals en
dc.subject.lcsh Earnings management--Malaysia en
dc.title Reversal of impairment losses, firm performance and reporting incentives: Evidence from Malaysia en
dc.type Doctoral thesis en
dc.type.qualificationlevel Doctoral en
dc.type.qualificationname PhD (Commerce) en
dc.internal.availability Full text available en No embargo required en
dc.description.version Accepted Version
dc.contributor.funder Ministry of Education, Malaysia en
dc.contributor.funder Universiti Utara Malaysia en
dc.description.status Not peer reviewed en Accounting and Finance en
dc.check.type No Embargo Required
dc.check.reason No embargo required en
dc.check.opt-out No en
dc.thesis.opt-out false
dc.check.embargoformat Not applicable en
dc.internal.conferring Autumn Conferring 2013 en

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