Accounting & Taxation 5, no. 1 (2013): 59-70

 

MANAGERIAL OWNERSHIP, LEVERAGE AND AUDIT QUALITY IMPACT ON FIRM PERFORMANCE: EVIDENCE FROM THE MALAYSIAN ACE MARKET

 

Sulong, Zunaidah, John C. Gardner, Amariah Hanum Hussin, Zuraidah Mohd Sanusi, and Carl B. McGowan

 

Abstract

This paper extends the agency cost literature by examining whether managerial ownership, leverage and audit quality are associated with higher performance of companies traded on the Malaysian ACE (Access, Certainty, Efficiency) Market. The sample consists of 82 companies listed on the Malaysian ACE Market for the period from 2007 to 2009. Analyses of descriptive statistics, correlation analysis, and multiple regressions are used to address the research hypotheses. The descriptive statistics analysis reveals that ACE Market companies do not perform better for the three year test period. This result may explain why the number of listed stocks on the ACE Market decreased from 2006 to 2009. Contrary to the proposed hypotheses, this study finds that audit quality has a statistically significant negative effect on firm performance. The empirical results suggest that higher audit fees received by auditors may create bonding between client and auditors.

Keywords: Managerial ownership, Leverage, Audit quality, Governance mechanisms, ACE market