Abstract

This study examines the relationship between the proportion of family members in corporate boards and earnings management of 236 sample companies listed on the Main Market of Bursa Malaysia in 2009. Emerging literature supports the notion that family control would constrain earnings management and positively influence corporate performance. Consistent with previous studies, we use discretionary accruals as a proxy for earnings management.

The regression result shows that proportion of family members on the board is positively associated with discretionary accruals. This reflects that the effort to mitigate earnings management is significantly reduced when family members are present on corporate boards, especially when family members dominate the corporate board.

The findings also provide evidence on board size, audit committee size, number of audit committee meeting and company size influence on discretionary accruals. The rest of explanatory variables; board independence, audit committee with financial expertise, auditor type and leverage were not significant.

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