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

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dc.check.embargoformatNot applicableen
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dc.contributor.advisorDonnelly, Raymonden
dc.contributor.advisorCao, Tong Yuen
dc.contributor.authorShaari, Hasnah
dc.contributor.funderMinistry of Education, Malaysiaen
dc.contributor.funderUniversiti Utara Malaysiaen
dc.date.accessioned2014-02-05T15:39:03Z
dc.date.available2014-02-05T15:39:03Z
dc.date.issued2013
dc.date.submitted2013
dc.description.abstractMalaysian 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.sponsorshipMinistry of Education, Malaysia (Bumiputera Academic Training Scheme)en
dc.description.statusNot peer revieweden
dc.description.versionAccepted Version
dc.format.mimetypeapplication/pdfen
dc.identifier.citationShaari, H. 2013. Reversal of impairment losses, firm performance and reporting incentives: Evidence from Malaysia. PhD Thesis, University College Cork.en
dc.identifier.endpage251
dc.identifier.urihttps://hdl.handle.net/10468/1371
dc.language.isoenen
dc.publisherUniversity College Corken
dc.rights© 2013, Hasnah Shaarien
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/en
dc.subjectReversal of impairment lossesen
dc.subjectEarnings managementen
dc.subjectIFRSen
dc.subjectAbnormal accrualsen
dc.subject.lcshEarnings management--Malaysiaen
dc.thesis.opt-outfalse
dc.titleReversal of impairment losses, firm performance and reporting incentives: Evidence from Malaysiaen
dc.typeDoctoral thesisen
dc.type.qualificationlevelDoctoralen
dc.type.qualificationnamePhD (Commerce)en
ucc.workflow.supervisorrdonnelly@ucc.ie
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