THE RELIABILITY OF QUARTERLY FINANCIAL REPORTS OF COMPANIES IN MALAYSIA

Ku Nor Izah Ku Ismail; Roy Chandler

doi:10.31436/ijema.v13i2.112

Authors

Ku Nor Izah Ku Ismail Associate Professor, Faculty of Accountancy, Universiti Utara Malaysia, Sintok 06010, Kedah Darul Aman. Tel: 604 9284902 (e-mail:norizah@uum.edu.my)
Roy Chandler Professor of Accounting, Cardiff Business School, Cardiff University, UK

DOI:

https://doi.org/10.31436/ijema.v13i2.112

Abstract

This study examines the reliability of corporate quarterly reports of Malaysian companies by analyzing the reporting of exceptional items. The quarterly reports are likely to be unreliable if companies tend to defer the reporting of exceptional items to the final quarter. In examining the quarterly reports of 114 companies listed on the Kuala Lumpur Stock Exchange, this study provides evidence that a majority of companies defer the reporting of exceptional items to the fourth quarter. It is also observed that a majority of companies made negative adjustments during the fourth quarter. Therefore, the quarterly reports are likely to be unreliable, and there are reasons to believe that companies manage their quarterly earnings. In addition, this study provides evidence that non-profitable companies defer the reporting of exceptional items to the fourth quarter more than the profitable ones. However, there is no evidence of association between the deferment of the recognition of exceptional items and the size, growth, and leverage of a company.

JEL classification: G34, M41

Key words: Quarterly financial reporting, Reliability, Earnings management