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Unique determinants of abnormal earnings growth in Malaysia

Unique determinants of abnormal earnings growth in Malaysia Purpose – This paper aims to use Malaysian data to investigate determinants of the implied growth rate of abnormal earnings. Design/methodology/approach – The sample comprises 340 listed companies. Logistic regressions were conducted. The dependent variables, observed in 2009, distinguish companies with high versus low implied growth rates. The independent variables were observed in 2008. The independent variables of interest capture companies’ status as being Nanyang and politically connected corporations. Findings – The results suggest that in Malaysia, implied growth rates are higher for Nanyang corporations and companies with a political connection related to economic policy. Research limitations/implications – The study is limited by its one-year investigation period and blurred boundaries between types of political connections. Because these considerations bias the study against supporting the hypotheses, the significant results have enhanced credibility. The empirical proxies for implied growth rates are affected by measurement error. Hence, multiple proxies were used. Practical implications – The results suggest that Malaysian Nanyang corporations are a sound investment. The evidence also indicates that in Malaysia, government investment in listed companies enhances, rather than erodes, shareholder wealth. Originality/value – Owing to the prevalence of Nanyang companies and government investment in the private sector, the Malaysian setting is unique. The use of a broad definition of “political connections” is a unique aspect of this paper. Examination of implied equity growth rates and the proxies for the same are also original features. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

Unique determinants of abnormal earnings growth in Malaysia

Pacific Accounting Review , Volume 28 (1): 22 – Feb 1, 2016

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0114-0582
DOI
10.1108/PAR-09-2013-0093
Publisher site
See Article on Publisher Site

Abstract

Purpose – This paper aims to use Malaysian data to investigate determinants of the implied growth rate of abnormal earnings. Design/methodology/approach – The sample comprises 340 listed companies. Logistic regressions were conducted. The dependent variables, observed in 2009, distinguish companies with high versus low implied growth rates. The independent variables were observed in 2008. The independent variables of interest capture companies’ status as being Nanyang and politically connected corporations. Findings – The results suggest that in Malaysia, implied growth rates are higher for Nanyang corporations and companies with a political connection related to economic policy. Research limitations/implications – The study is limited by its one-year investigation period and blurred boundaries between types of political connections. Because these considerations bias the study against supporting the hypotheses, the significant results have enhanced credibility. The empirical proxies for implied growth rates are affected by measurement error. Hence, multiple proxies were used. Practical implications – The results suggest that Malaysian Nanyang corporations are a sound investment. The evidence also indicates that in Malaysia, government investment in listed companies enhances, rather than erodes, shareholder wealth. Originality/value – Owing to the prevalence of Nanyang companies and government investment in the private sector, the Malaysian setting is unique. The use of a broad definition of “political connections” is a unique aspect of this paper. Examination of implied equity growth rates and the proxies for the same are also original features.

Journal

Pacific Accounting ReviewEmerald Publishing

Published: Feb 1, 2016

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